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Week In Review


The Trump administration announced a “Phase 1” deal with China to delay this week’s implementation of additional tariffs in exchange for Chinese purchases of U.S. agricultural products.  The Chinese side indicated that further discussions are needed.  Third quarter GDP growth slowed to 6.0%, the slowest level in decades.

Our Take

Even if trade tensions between the U.S. and China are not increasing, no implemented tariffs have been rolled back, and there is no clear path to a resolution of the larger conflict.  Without a reduction in tariffs and greater certainty around the likely future course of tariffs the Chinese economy will continue to slow and global manufacturing output will remain under pressure.

Retail Sales

September retail sales fell 0.3%. Control group sales, used to calculate GDP, were unchanged.

Our Take

Sales were expected to rise 0.3% rather than fall.  This is a worrisome report as consumer strength has been bolstering GDP.  Should the consumer falter, a slowdown becomes likely as do future Fed rate cuts.


Johnson and the EU reached an agreement on an exit deal that would see Northern Ireland remain in the EU customs and regulatory regime until a trade agreement between the UK and the EU removes the need for customs checks at the border with Ireland.  The DUP immediately denounced the deal, and Johnson will work to get the deal through Parliament without DUP support.  Macron, Juncker and Varadkar all expressed skepticism about an extension of the October 31st Brexit date if the current deal is not approved.

Our Take

Johnson’s parliamentary math is very tight, and it will be difficult for him to get this deal approved.  It seems unlikely that the EU will refuse an extension from October 31st and force a no deal Brexit, but they may require a general election to break the deadlock in parliament as a condition of granting an extension.


Moody’s Investors Service upgraded California general obligation debt rating from Aa3 to Aa2.  This marks the highest Moody’s rating since 2001.  Moody’s cited the state’s diverse economy, revenue growth and increasing reserves as reasons for the upgrade.

Our Take

Moody’s upgrade follows Fitch’s upgrade to AA last summer.  California has worked hard to improve its fiscal health since the recession by managing spending and growing the reserve fund.  This week’s upgrade is good news for bondholders.

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.