Overview: Stocks finished the week strong on news of optimism around a ‘Phase 1’ U.S.-China trade deal. The deal cancels the 25% tariff on $160 billion of Chinese goods originally scheduled for Sunday, December 15. At the same time, tariffs remain in place on $370 billion of imports. As part of the deal, China agreed to purchase an extra $200 billion in U.S. agricultural, energy and manufactured products over the next two years. Also included was a provision for better policing counterfeiting, patent, and trademark violations. U.S. stocks responded positively, with the S&P 500 Index up 0.8% on the week. Across the pond, Prime Minister Boris Johnson’s Conservative party won a decisive majority in the U.K. elections. The election results should reinforce the passage of his Brexit withdrawal bill, setting the U.K. on course to leave the European Union on January 31, 2020. The election result reduces the risk of a “no-deal” departure of the U.K. from the European Union, and eliminates a key risk for the U.K. and European economies. International developed stocks rallied on the news, with the MSCI EAFE Index up 1.7% for the week.
In the bond markets, interest rates have traded in a narrow range for the past few months. At their most recent meeting last Wednesday, the Federal Reserve announced no rate changes, and no expectations for any further rate cuts in 2020. Fed officials presented a supportive economic backdrop, citing a healthy labor market, accommodative policy, and lack of persistent inflation. Year-to-date bond returns have been exceptional, with the Bloomberg Barclays Aggregate and Municipal Indices up about 8.9% and 7.5% respectively. Interest rates are lower across the curve for 2019, with the yield on the Aggregate Index falling from 3.28% at the start of the year to 2.38% currently.
Weekly Returns and Data
Sources: Goldman Sachs Asset Management, JP Morgan
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