Markets gave back all their gains on Thursday and Friday. Much of it was related to trading foes, was there just cause for the reversal?
The USMCA (NAFTA 2.0) reaches agreement between the US, Mexico and Canada. USMCA provides for improved agreement conditions for autos, dairy, and building materials. The renewed commitment to North American trade, truly, brings a sense of encouragement surrounding US trade in general.
The unemployment rate floated to its lowest level in 40 years. An impressive achievement as job additions were meager for the month. Newly unemployed figures were very low as well. There are reports saying the data is skewed due to hurricane activity. Important to note that wage growth came in at 2.8% stoking concerns about inflation.
Interest rates responded to Federal Reserve Bank (FRB) projections for the growth over the next 2 years. The FRB outlook calls for a sustained period of growth without inflation running rampant. This is great news, however interest rates moved north as a result (rates and prices move in opposite directions). Also, equity markets responded with a sell off as fears mounted over debt obligations, consumer spending, and profitability.
Tariffs begin to take their toll on markets, but in a way few expected. 50% of Chinese imports to the US are technology based. The NASDAQ has started to see the pain in response. The trade war appears to be escalating, not moderating.
The pull back in markets was warranted in the short-term. Optimism from early in the week converted to concerns over another trade advisory late in the week. The economic landscape is fairly bright and should continue to yield good profits. Continue to look for trade to bring volatility along the way.
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