Equity markets were mostly flat this week as earnings reports continued to roll in and no major news on the trade front kept investors on edge. Meanwhile, Treasury yields have continued to stay higher off their September lows, and the key portions of the yield curve have remained out of inversion territory for now. Brexit also showed signs of life, but for now a deal appears to be further put on hold and another extension likely, leaving a cloud over Britain for over three years and counting. Meanwhile, in the US, monetary policy makers will meet next week to decide if another rate cut is warranted, which is overwhelmingly anticipated by investors. Chinese trade negotiators also made some overtures, agreeing to additional agricultural purchases if a phase one deal is signed, as their economy slowed to its lowest growth rate since the early 1990s.

This earnings season is crucial for equity markets moving forward, as expectations are low and the guidance laid out by CEOs will be closely watched for additional weakness in the US economy. Data such as US factory orders for business equipment, housing sales, and manufacturing continue to look weak, as the global economy faces a slowdown from the effects of the trade war. Business confidence has been drained from corporate leaders as additional investments for future growth have been put on hold until more clarity on trade can be found. This has been confirmed by the recent manufacturing data out of Germany, which is seen as the first casualty from trade restrictions, with a significant portion of their economy reliant on global trade flows with China and the US. Looking to offset the effects from trade uncertainty, the European Central Bank this week maintained their policy of record low-interest rates and the resumption of quantitative easing of $20 billion euros of bond purchases per month in an attempt to stimulate the economy further. Many, however, believe that central bank efforts to revive the economy are too late and will accomplish very little, and are looking to federal governments in Germany and elsewhere to unleash fiscal stimulus in the form of tax cuts or government spending.

We have made some small adjustments to the portfolios, putting some free cash to work in select portions of the equity markets that we believe are attractive at this time. We remain defensively positioned, though earnings have surprised to the upside both in terms of last quarters’ results as well as expectations going forward. With the Federal Reserve doing everything it can to continue the current economic expansion, we believe there remains positive momentum. At the same time, with the increasingly uncertain political environment, we will maintain a bias toward higher quality stocks and bonds that should be more capable of weathering any disruptions ahead. As always, we continue to remain extremely focused on monitoring unfolding market dynamics and reacting only when appropriate. Please feel free to call our office with any questions you may have.