Investment Strategy Report - OctoberÂÂÂÂÂ 2018: Keep Defensive Status
The fact that the United States and Canada came up with an agreement on NAFTA shows that the US attitude toward trade relations is not as negative as President Trump claims. This does not ensure that US-China trade relations will improve, but it is likely that tensions have somehow abated. Markets should not be too concerned at this point although risks remain.
However, factors that influence the flow of capital to emerging markets are still mixed. The Fed’s intention to raise interest rates three times in 2019 is quite unexpected. Meanwhile, US 10-year Treasury bond yields reached 3.2% this past week, breaking through a 37-year downward slopping trend line. This bond sell-off, as we mentioned a few months ago, is significant as it indicates the end of an era of low interest rates and, hence, ‘free money’.
The fact that the United States and Canada came up with an agreement on NAFTA shows that the US attitude toward trade relations is not as negative as President Trump claims. This does not ensure that US-China trade relations will improve, but it is likely that tensions have somehow abated. Markets should not be too concerned at this point although risks remain.
However, factors that influence the flow of capital to emerging markets are still mixed. The Fed’s intention to raise interest rates three times in 2019 is quite unexpected. Meanwhile, US 10-year Treasury bond yields reached 3.2% this past week, breaking through a 37-year downward slopping trend line. This bond sell-off, as we mentioned a few months ago, is significant as it indicates the end of an era of low interest rates and, hence, ‘free money.
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