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Week In Review


May agreed with the EU to extend the Brexit date to Halloween with the option to leave sooner if Parliament ratifies the separation agreement.  If this does not happen by May 22 then the UK will have to participate in European Parliament elections.  May’s government and Labour are continuing talks to formulate a cross-party majority for the separation agreement that will most likely include an effective customs union.

Our Take

May has left a significant portion of Conservatives feeling betrayed, and she can no longer count on party unity to get a separation agreement passed.  If she is unable to strike a deal with Labour, it is very likely that May’s government will fall and a general election will be needed.  In such a scenario, any number of outcomes are possible based on the election results.


March Chinese exports rebounded sharply from February’s low number that was depressed by the timing of the Lunar New Year.  Imports were still soft.  Credit growth picked up significantly in response to monetary and fiscal policy initiatives to support growth at targeted levels.

Our Take

The export data is noisy due to the holiday timing, but the soft import data indicates that domestic consumption likely remains soft.  The resumed growth in credit indicates that policy actions are having their desired short-term effects, but at the cost of long-run sustainability of growth and increased financial risk and susceptibility to shocks.


Consumer prices rose 0.4% in March, while producer prices increased 0.6%, both due in large part to gasoline price hikes.  Over the past twelve months, consumer prices are up 1.9% and producer prices have risen 2.2%.

Our Take

A lack of inflationary pressure is a key reason the Fed has chosen to stop tightening.  While these inflation reports appear to be an uptick, core inflation remains benign and nothing in the reports should cause the FOMC to adjust its current monetary policy.

Fed Minutes

This week the Federal Reserve Open Market Committee (FOMC) released the minutes from its March meeting.  The minutes supported the Fed’s continued patient stance on rates first put forward earlier this year.  According to the minutes, members struggled with “significant worries” including sluggish U.S. growth earlier in the year, a weaker global economy, Brexit, and continuing trade tensions with China.  For now, policymakers see little risk in leaving interest rates alone while taking time to assess these risks.  According to the minutes, several policymakers believe their views of the appropriate range for the federal funds rate could shift in either direction, while some participants indicated that under certain conditions they would “likely judge it appropriate” to raise the target rate modestly later this year.  In the end, a majority of the committee expect the evolution in the economic outlook to “warrant leaving the target range unchanged for the remainder of the year.”

Our Take

The patient stance of the Fed suggests that the committee believes the current rate level is at or near neutral.  Although a few more hawkish members would not rule out another increase in interest rates this year, most participants believe a sidelined approach to be more appropriate amid rising uncertainty and waning global growth.


Kentucky Governor Matt Bevin, a Republican, vetoed a pension bill this week.  House Bill 358 provided relief for certain quasi-government agencies including local health departments and regional universities struggling with rising pension costs.  Governor Bevin stated that parts of the bill “violate both the moral and legal obligations” to retirees.  The governor indicated that he would call for a special legislative session to address pension issues prior to the July 1 budget deadline.

Our Take

Lawmakers from both parties voiced concern over the veto.  Republicans had met with stakeholders and thought that the bill was acceptable.  Democrats criticized the additional cost of a special session.  Before a special session convenes, lawmakers and Governor Bevin should have an agreement in place.  Pension reform must be a priority.  Kentucky cannot afford an impasse.

All expressions of opinions are subject to change without notice in reaction to shifting market conditions.  All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.  Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice.