Overview: Stock markets traded lower last week and yesterday, Aug. 5, as markets reacted mainly to tariff escalations in trade with China. The S&P 500 fell about 6% over the six-day period, and the selloff extended to markets globally. The Trump administration’s 10% proposed tariff on the remaining $300 billion of Chinese imports extends beyond the capital goods previously affected, as it will primarily impact direct consumer goods. China quickly retaliated by allowing the yuan to trade above seven against the dollar for the first time since 2008. This devaluation can make Chinese exports cheaper, which would serve to counteract increased tariffs. Bonds traded higher as investors flocked to safe-haven assets. Yields on the 10-year Treasury plummeted to as low as 1.7% on Monday, Aug. 5, after starting the month at 2.0%. The Federal Reserve lowered rates by 25 basis points at their meeting last week, and markets are now pricing in 2-3 more rate cuts by the end of 2019.
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