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Last week saw strong risk asset performance as a weakening economy increased the odds for Central Bank stimulus later this year. The economic data last week disappointed and is consistent with decelerating economic growth. For the rest of the year, I anticipate GDP to slow to less than 2%. In this environment, I don’t see the Federal Reserve decreasing interest rates more than once and don’t believe a recession is on the immediate horizon.
After the market closed Friday, the Trump administration announced that a deal had been reached with Mexico to delay tariffs. This outcome should be positive for U.S. equities and emerging markets. Uncertainty, however, is still high as a potential policy mistake or unexpected turn of events leaves markets on edge. Markets like uncertainty less than bad news, and for the next few weeks, uncertainty will remain elevated.
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