The nuclear test by North Korea has brought geopolitical uncertainty to a new level. As I have previously written, it is very hard to trade geopolitical risk so I prefer to stay focused on fundamentals.
Last week’s August employment report was weaker than expectations on almost all aspects. The report comes after stronger employment data earlier in the week. The ramifications of the weaker report bring the odds of a December interest rate increase by the Federal Reserve (Fed) to less than 50/50. The weaker average hourly earnings and sluggish inflation data may keep the Fed on hold until after the holiday spending season.
Pay attention to the level of the 10-year Treasury as it approaches lows for the year. Also, look out for the flattening of the yield curve as a warning sign for economic conditions going forward.
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