Hopeful trade headlines hit the news outlets Thursday morning propelling the markets out of their choppy range, one that had formed since the beginning of August. The President and his top trade advisors announced that they have plans to meet with Chineses officials again at the beginning of October.
There has been some nice relief since the middle of August with regards to the S & P 500; however, we would position ourselves as remaining slightly skeptical of the bounce (not deploying all of our capital). If we have learned anything from the trade war it is that nothing is certain until an agreement is signed. Many are debating if the President will use a trade resolution as a campaign tactic for November’s election; however, his recent rhetoric leads us to believe he really wants a change in the decades old trade deficit with China and might even risk his popularity to enforce his trade leverage.
This announcement is just one in a series of geopolitically charged data points coming out this Labor day shortened week. Jobs numbers for August hit the street today missing estimates and showing that the Fed’s belief that new hires are slowing has been accurate thus far. Jobs, unemployment, inflationary data, and a few other points are all taken into account for the Federal Reserves data dependent stance with regard to setting rates in the future. A lack of job growth coupled with low inflation increases the likelihood that the Fed will issue another rate cut at some point before the year ends. While the Fed is still being keyed in on by the President, it seems that lately tariffs are swinging the markets more than interest rates, which is a change from what happened at the end of 2018 and beginning of this year.
Yields on the 2 year and 10 year Treasury bills are currently back to normal (not inverted) which is also helping ease market fears. Earnings have been fairly good overall for US companies, and with that in mind, we remain confident that US equities and real estate are the best places to find return for your dollars when compared to other investments.