After a short holiday week that saw equities and oil prices continue to decline significantly, the markets will be focused on this week’s G20 summit and the potential for a Brexit deal. Equities have been under pressure over the last several weeks due to concerns about trade and global growth. With a much-anticipated discussion between the U.S. and China, markets will be looking for any favorable news regarding a trade deal. In the U.K., Prime Minister Theresa May will be trying to sell the Brexit deal that she negotiated to skeptical politicians at home. At this point, the uncertainty related to these global trade factors in the coming years is more significant for markets than the short-term impact on economic fundamentals, which remain firm in the U.S. despite weakening from the robust pace of the second and third quarters.
The other key event this week is the release of the November Fed minutes. With markets still widely expecting a December rate increase, despite declining equity prices, the markets will be looking for some dovish news in the minutes about the path for interest rates in 2019. I continue to favor a defensive position in equities and a long position in U.S. Treasuries.
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