Contact Us
Download PDF

Week In Review

The Fed

This week the Federal Reserve Open Market Committee (FOMC) announced its decision to lower the federal funds rate to 2.0% from 2.25%.  According to the Fed statement, the labor market remains “strong” and economic activity continues rising at a “moderate rate.”  While the cut and statement were in line with market expectations, Powell’s press conference was perceived as more hawkish due to him characterizing the cut as a “mid-cycle adjustment” rather than the beginning of a prolonged easing cycle.

Our Take

For the first time since 2008, the Fed lowered interest rates.  This move was highly anticipated, and the only uncertainty was the size, as some speculated that the Fed may cut by 50bps.  In the end, the Fed holds a positive view on the economy but recognizes there are potential headwinds stemming from low inflation and international uncertainties.  Should growth and inflation continue to run below expectations, we may see additional accommodation later in the year.


Minister-level trade talks ended with no progress made, and in response President Trump tweeted that the proposed 10% tariffs on the remaining non-tariffed $300 billion in Chinese imports to the U.S. will be implemented on September 1.  The president also indicated that this rate could be increased and the 25% rate on other imports could be increased as well.  The Chinese government stated that China would retaliate in an unspecified manner if these tariffs are implemented.  Capital markets reacted violently to this announcement with the yield curve further inverting and equities down 2% from their pre-announcement levels.

Our Take

The truce negotiated between Trump and Xi at the G-20 is over, and the trade war is escalating again.  A resolution to the conflict does not seem to be any closer than it was last year.  Markets are clearly concerned about the impact of a sustained trade conflict.  The items facing new tariffs are skewed more heavily to U.S. consumer spending, which is the bright spot that has been sustaining U.S. growth recently.


U.S. employers added 164,000 jobs in July, and revisions reduced gains the prior two months by 41,000 leaving the three month average gain at 140,000 jobs per month.  Unemployment was unchanged due to an increase in labor force participation.  Wages rose 3.2% from a year earlier, but this was partly driven by a decline in the average work week.

Our Take

This report is consistent with a decelerating but still growing economy.  Both markets and the Fed will be watching employment closely in the coming months to look for signs that manufacturing weakness, the global slowdown and the trade war are starting to impact the employment and wages that drive consumption in the U.S.

Other U.S. Data

Personal consumption data showed that consumer incomes and spending continue to grow at moderate levels and that consumer inflation continues to firm.  The manufacturing ISM index remained at levels just above those indicating a contraction.  June factory orders and capital goods shipments also remained weak.

Our Take

These reports paint a picture of the U.S. economy where consumer spending remains strong but business investment and goods production are weak.  The divergence between these two is unlikely to persist.


Chicago Mayor Lori Lightfoot issued an executive order that will move the deadline for the city’s preliminary budget from July 31 to August 31.  The newly elected mayor’s office cited the shorter transition period as the reason for the change.  Mayor Lightfoot defeated Toni Preckwinkle in a runoff election on April 2.  Outgoing Mayor Rahm Emanuel’s office had estimated a budget shortfall of $740 million.  Mayor Lightfoot has indicated that the actual number is higher.

Our Take

Along with the anticipated budget deficit, Chicago continues to struggle with growing pension costs.  Mayor Lightfoot is taking extra time to work with her advisers on the preliminary budget but also adding uncertainty to the process.

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.