North Korea and tax reform took a back seat in the U.S. news as the aftermath of Charlottesville sparked a rift between President Trump and corporate CEOs. While equity markets rallied earlier in the week as North Korea backed away from an attack on Guam, U.S. stocks retreated heavily on Thursday on a sentiment shift and a terrorist attack in Barcelona. The Federal Reserve minutes from the July meeting were released this week and revealed a shifting tone on further rate hikes in the face of softer inflation data.  Fed Open Market Committee members Neel Kashkari and Robert Kaplan reiterated this message and raised the issue of the U.S. debt levels during separate public speeches this week.

Domestic stocks continued last week’s decline with small cap stocks now in negative territory on a year-to-date basis. Walmart and Cisco both added to the negativity with less than stellar earnings reports. Given that U.S. stocks have notably outpaced international equities over the last five years on a return and valuation basis, it is not surprising to see that international stocks still posted gains for the week with emerging markets fairing the best. Bond yields moved higher earlier in the week and then lower again as investors shifted into safer assets and received confirmation that the next Fed rate hike may not come as easily as the past two this year.