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AUTHOR: Jason J. Roque, CFP®, APMA®
TITLE: Investment Adviser Rep – CCO TAGS: TRADE, FRB, INTEREST RATES |
Last week markets were mixed as the week started strong and faded through the holiday. What caused the loss of confidence throughout the week?
Trade
Last weekend saw renewed optimism around trade. The G20 summit brought the US and China together to prevent further escalation in the trade war. The US has elected to not levy tariffs on an additional $350B in goods. Additionally, they have softened their stance on telecom giant Huawei. Markets opened the week strong on this news and markets surged to all-time highs.
Federal Reserve Board (FRB)
As the week wore on, fears mounted that a strong jobs report could dampen expectations of a steep FRB rate cut on July 31st. Employment numbers improved from May, coming in at 224K additional jobs for the private sector in June. The unemployment rate did tick up to 3.7% from 3.6%, but the participation rate went up as well[2]. A strong job market and mediocre inflation leaves little-to-no reason for the FRB to cut rates. They likely will cut, as it has been telegraphed, but this “cut cycle” may literally last only one cut.
Conclusion
Market reactions last week made sense from a short-term perspective. The surge was in response to hope on the trade front. Short-term positivity while a trade deal has yet to materialize. The fade late in the week was on the reduced hope of easy monetary policy. A short-term strain in response to positive economic data. Ultimately, last week did not provide clarity on trade or economic conditions. So, movements did not tell us much regarding economic health.
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment. Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.
[1] www.G20.org
[2] www.investing.com/econimic-calendar