China tariffs delayed. Stocks are unchanged this morning amid reports indicating the U.S. may delay a tariff hike on $160 billion in Chinese goods, which was initially scheduled to kick in on December 15. That’s a positive sign for the U.S.-China relationship, but it apparently isn’t enough to push stocks higher after the S&P 500 Index’s 0.3% loss. Several macroeconomic events are also looming, including the Federal Reserve (Fed) and European Central Bank policy announcements on Wednesday and Thursday. The United Kingdom (U.K.) is also scheduled to hold a general election on Thursday.
Range-bound 10-year yield. The 10-year U.S. Treasury yield rose 6 basis points (0.06%) last week as trade sentiment turned optimistic once again, and investors digested better-than-expected November jobs data. While we feel encouraged by marginally higher yields, recent action has shown that there’s also an implicit ceiling without some sort of U.S.-China trade agreement. Even if that happens, we think it could take some time for the 10-year yield to creep up to levels justified by fundamentals.
A pivotal year for the Fed. It has been a pivotal year for monetary policy. Few people would’ve predicted the Fed’s December 2018 rate hike would be its last for at least a year, and that policymakers would implement three consecutive rate cuts in 2019. The Fed is slated to tie a bow on its year of policy U-turns with its Wednesday policy announcement, which will be followed by Fed Chair Jerome Powell’s typical post-meeting press conference. We’ll preview the upcoming Fed decision today on the LPL Research blog.
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