Wednesday afternoon, the Fed announced a rate cut of 25 basis points, putting the new target federal funds rate in the range of 2.00%-2.25%. Fed Chair Jerome Powell gave off mixed signals in his press conference following the meeting. Many were expecting more dovish indications than the chairman gave, including President Trump who continued his prominent criticism of Powell and the Fed. Traders are now pricing in two more rate cuts by the end of 2019 and expecting further cuts in 2020. Trade tensions were escalated again Thursday as President Trump announced a 10% tariff on essentially all remaining goods imported from China that are not already subject to tariffs. President Trump also announced a deal to boost beef exports to the European Union Friday afternoon, hoping to stymie the struggles for U.S. agriculture amid trade difficulties with China.
Global markets were patient early in the week, waiting on the decision from the U.S. Fed. After the interest rate cut was announced, rates dropped. The 10-Year Treasury yield hit its lowest level since 2016. Stocks also fell as investors were hoping for a more accommodative stance from Powell and the FOMC. Trade concerns flared up again on Thursday, weighing on investors. After a tough week, the S&P 500 closed down over 3%, with developed international stocks following suit. Emerging market stocks plunged down almost 5% on the week, and domestic small caps managed to keep losses from reaching 3%. Bond funds performed well this week as prices rose to reflect the decline in rates.
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