A packed news week began with a historic meeting between President Trump and North Korean leader, Kim Jong Un, and ended with a plan to enact tariffs of 25% on $50 billion in Chinese goods. China responded with a plan to tax U.S. goods, primarily agriculture products, at the same levels using the same dates. The Federal Reserve raised its benchmark rate another 0.25% to a range of 1.75%-2% and the expectation was set that there could be another two rate hikes this year. The European Central Bank, however, announced that they would not move to raise rates prior to the summer of 2019. While headline U.S. inflation data set new highs this week, core inflation remains in check.

While U.S. stocks fell on Friday after the tariff news, both large cap and small cap stocks eked out another positive week. Developed international and emerging market stocks fell as the stronger dollar and dovish ECB policy hindered their dollar denominated returns. Emerging market stocks, in particular, continued to dive with the strength of the dollar and as fears that problems in Brazil and Argentina will expand to other countries. Even with this recent pullback, emerging market stock returns are still well above 10% on a trailing one-year basis. Oil prices fell in advance of the OPEC meeting as Russia and Saudi Arabia both signaled they would be willing to increase output.

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