Economic Update — April 2019

Last week, the financial markets showed some of the volatility that I predicted and communicated to you in January. Ten-year Treasury notes dropped to a low of 2.39%, which falters below the three-month Treasury bills. This occurrence is known as an inverted yield curve and can be viewed as a precursor to recession. The chart below shows the 10 Year-3 Month Treasury Yield Spread.

Information contained herein has been obtained from sources we believe reliable but is not guaranteed.

There’s also been some talk of the Federal Reserve cutting interest rates, though based on my research not all members of the Fed have jumped on the band wagon. It appears some board members are looking for tangible U.S. data to justify the recent reduction of intermediate bond yields. Specifically, some board members seem to be awaiting the March jobs report, which is due this Friday, as well as insights into American retail spending and manufacturing production.

Also of international importance is the current status of U.S. trade agreement discussions with China as well as Brexit. 

China Trade Agreements:  While progress has occurred in the U.S./China trade talks, an agreement is not yet on the table.  Prevailing negotiation points remaining are the forced transfer of technology to Chinese companies and reorientation of the Chinese economy to become more open to American companies and investment.  In the meantime, China has extended their suspension of tariffs on American cars while negotiations continue.

Brexit:  Another exit plan for Britain to leave the European Union was voted down on Friday.  The exit plan focuses on the eventual removal of Britain from Europe’s main economic structure and helps provide immigration control from continental Europe.  If Parliament fails to find an agreeable solution this week, Britain potentially faces a no-deal exit or they request another extension from bloc leaders before the April 12 deadline. 

In line with previous expectations, it seems apparent that 2019 will be one of volatility for the financial markets making this an appropriate time to invest with caution. I will monitor changes and communicate them to you as they occur. In the meantime, if you have any questions or concerns, please feel free to call.