Events in Hong Kong have continued to develop as protesters showed their frustration with the relationship between the autonomous region and the country of China. Flights at Hong Kong International Airport were cancelled after violent protests broke out Tuesday night. Most flights were resumed by Wednesday morning. The U.S. announced Tuesday that it would delay a pending 10% tariff on certain consumer goods until December 15, after a portion of the holiday shopping season. International economic data released during the week showed that the German economy shrank in the second quarter, and Chinese factory output grew at its slowest pace in 17 years. Domestic data released this week showed that U.S. inflation picked up in the month of July, moving closer to the Fed’s 2% annual target.

U.S. Treasury yields continued to fall this week, making headlines as the 2Y-10Y yield curve temporarily inverted. This means the yield on a 10-year Treasury Note fell below that of a 2-year Treasury Note. This is a popular indicator of a coming recession. The yield on 30-year Treasury bonds also dropped this week to a record low Thursday and stayed below 2% for most of Thursday.  The possibility of more hawkish Fed actions due to stronger inflation could be overwhelmed by mounting fears of an international economic slowdown. Bond funds were up on the week as investors continued to move toward safer assets. This flight to safety had risky assets like equities performing poorly. Domestic large cap, domestic small cap, international developed, and international emerging all closed the week down, even after strong rebounds on Tuesday and Friday.

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