Economy
We're in the second week of the government shutdown, which means we're still in a blackout of economic data reports from the usual federal agencies. There's not much to discuss from the past week, so let's look ahead to what's coming. The Federal Open Market Committee (FOMC) is the group of Fed members that vote on what to do with interest rates. They are scheduled to meet at the end of the month, and will announce their next move on October 29. The Federal Reserve operates as an independent entity within the federal government, but is not a federal government agency, and as such is not part of the shutdown. However, if the government has not reopened by the next FOMC meeting, the voting members will in a sense be flying a plane without use of their visual instruments. They won't have fresh data on the health of the job market nor the recent pace of inflation. Still, the market is pricing in a 0.25% cut to rates, and setting the table for one final rate cut of 0.25% at the December 10 meeting (according to the CME FedWatch tool).
Markets
We were headed towards a slightly positive, mostly forgettable week in the stock market until Friday. The selloff started on rumblings that the Trump administration has been less-than pleased with China's decision to impose restrictions on not only the shipments of rare earth metals, but the products that incorporate them. The move from the Chinese government led to a Friday afternoon announcement from president Trump that there will be a new 100% tariff on China and additional export controls on software beginning November 1. The two heavyweight prize fighters throwing haymakers was enough to startle the equity markets and bring the profit takers from out of the woodwork, leading to the worst day for stocks since the April tariff tantrum. For the week, the S&P 500 decline 2.43%, the entire loss occurring within the final several hours on Friday.
Next week is the beginning of earnings season, and heading in to it expectations were high. We'll have to see how this latest tariff battle playing out impacts the market's reaction as companies are set to report, beginning with the major banks.
What We're Reading
- Ben's Spending Rules - Ben Carlson
- Why Delaying Your Social Security May Not Make Sense- WSJ
Have a great weekend.
Dogwood Wealth Management