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Market Commentary

A Very Quiet Friday, Sort Of

Posted on July 20, 2018

What was lining up to be a quiet Friday with no data releases, President Trump’s comment late yesterday on the Fed is providing headlines today.

Good morning!

  • Without any economic releases today, President Trump added some excitement to the market late yesterday which are all the headlines this morning
    • President Trump weighed in on the Fed’s plan to normalize rates saying, “I am not happy about it”
      • Where does this put the Fed? If they decide to pause for some reason, it begins to look like the President has some sway with the Fed
      • That’s not likely to happen, but some believe this does back the Fed into a corner
        • Just last week, Powell said, “We have a long tradition here of conducting policy in a particular way, and that way is independent of all political concerns”
      • The comment is puzzling, as the President is enjoying a strong economy with low interest rates and tame inflation
      • Long-time Fed follower Greg Ip has a story on this topic
    • The Philly Fed manufacturing index increased to 25.7 in July from 19.9, well above the market expectations of 21.1
      • New orders jumped by 13.5 points to 31.4 while shipments declined by 4.0 points to 24.7
      • The report showed that trade tensions have not slowed down manufacturing activity as both new orders and shipments remain elevated
      • The one area where trade related pressures may be surfacing is in prices paid and received, with manufacturers having limited ability to pass higher prices to customers
  • No other data today
  • For the week ahead:
    • 2Q GDP is expected to increase by 4.4%, as many expected, thanks to rebounding consumer spending thanks in part to the tax cuts
    • We also receive June durable goods data, and the markets expect headline orders to increase 3.0% over the past month
    • Existing home sales are projected to fall for the third consecutive month, declining 0.9%
  • News
  • Treasuries
    • 2-yr: 2.59%
    • 10-yr: 2.86%
    • 30-yr: 2.99%
    • 1-month: 2.09%
    • 3-month: 2.35%
  • Fed funds effective was 1.91%

Have a great weekend!


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