Rough Week for Equities

August 5, 2019

Rough Week for Equities Photo

Last week’s monetary policy developments and economic reports kept the markets’ attention. The Federal Reserve (Fed) cut interest rates for the first time in a decade. The July employment report showed the unemployment rate remained at 3.7%, while hourly earnings increased more than expected. However, a surprise escalation in the trade dispute with China caught markets off guard. The outlook for the next few months has likely changed as a result of this development. 

China will counter President Trump’s new tariff increases and I don’t expect the headline noise to be positive. A few months ago, I mentioned that the seven-Yuan-to-the-dollar threshold was key psychologically — that level was broken over the weekend.  

Over the coming weeks, I anticipate stocks will retest the levels seen in May. Bond yields have likely fallen in advance of the move in equities, with the 10-year Treasury trading near 1.75%, but it is unlikely rates will rise in the short term.

Tags: Federal Reserve | Employment Report | Tariffs | China | Yuan

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