Treasury yields and stock prices fell last week as the unexpected tariffs on Mexico unsettled markets. Meanwhile, trade tensions with China escalated, and sentiment surrounding the global economic outlook dimmed as a result. Consequently, Treasury yields fell and the yield curve inversion steepened. The market has now priced in two interest rate cuts in 2019.
Key reports on the U.S. economy are slated for release this week. The Institute for Supply Management manufacturing index and May employment data will be closely watched to gauge whether the U.S. economy is slowing. I anticipate slower growth in the second half of 2019, but I don’t expect it to slow enough to warrant a Federal Reserve rate decrease. With that said, headline news can significantly impact shorter-term market moves.
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