Mixed U.S. economic signals pierced the blanket of news from the House’s impeachment inquiry this week. The ISM Manufacturing Index showed a second month of contraction while unemployment fell to the lowest level since 1969. This continues the trend of softness in the manufacturing sector balanced by a stable U.S. consumer. The market is interpreting the weakness by pricing in another Fed rate cut causing the 10-Year Treasury rate to fall to 1.52%. In Washington, as the impeachment process is providing another catalyst for significant political drama and turmoil, negotiators will be preparing for a new round of trade talks with China starting on October 10. However, the White House has also shifted its trade rhetoric and focus to Europe. Tariffs as high as 25% on European exports – including French wine and cheese – are scheduled to go into effect by mid-October.

Markets took a nosedive midweek after the weaker ISM Manufacturing report and increased fears of an upcoming global slowdown. Friday, though, provided a nice rebound in U.S. large-cap stocks after the September jobs report was released. Overseas, the proposed tariffs on European goods added stress on stocks in these markets. For the week, small caps and developed international stocks took the brunt of the fall, while emerging markets gained ground. Bond prices rose as interest rates fell on a flight-to-safety and increased expectations of another rate cut. Oil prices fell sharply last week due to global growth concerns and the abatement of any supply gaps in the aftermath of the attack on the Saudi Arabian oil facility last month.