Fed Staying The Course

The tone in global risk markets was improved in September, with both Treasury yields and major equity markets higher over the month. Investors were largely dismissive of the announcement of more tariffs against China, and communication from Fed leaders following the September 26 FOMC meeting points to ongoing gradual policy tightening for the foreseeable future. On the trade front, President Trump hailed the finalization of USMCA, the new agreement with Mexico and Canada which will replace NAFTA, and the three country leaders expect to sign the agreement before the end of November.

September At-A-Glance

• Market sentiment improved in September, with investors seemingly shrugging off the latest negative trade headlines.
• Italian fiscal woes present another potential source of market volatility in the near term.
• The Fed continues to move forward with gradual policy tightening, and there were no major surprises from the September FOMC meeting.

There are no signs of easing tensions with China, but the markets appeared to shrug off the latest escalation. On September 17, President Trump announced new tariffs on $200 billion of Chinese imports. The tariff rate begins at 10%, and on January 1, 2019, the rate climbs to 25%. If China were to retaliate, the president threatened to initiate a third phase of tariffs, which would include approximately $267 billion of Chinese goods. As expected, China did indeed retaliate by announcing new tariffs on $60 billion of U.S. goods.

This market overview is provided by ALM First Financial Advisors, LLC, the investment advisor for Trust for Credit Unions. Read more from ALM First about the latest economic data releases and overall market trends at Trustcu.com.

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