Economic news has been volatile. Real personal consumption expenditures rose +0.4% m/m in October to +2.9% y/y, and like holiday sales, it’s solid but unexciting. Disposable personal income gained +0.3% m/m to a +2.8% y/y rate. The ISM manufacturing report came out stronger than expected, but a separate report showed construction spending was weak. Fed Chair Powell took a more dovish stance last week, saying that interest rates “remain just below” neutral as opposed to “a long way” from neutral previously. Over the weekend at the G-20, the USMCA was symbolically signed by the three countries, and the U.S. and China struck a temporary truce in their trade dispute. The next deadline is 90 days away when Trump may raise tariffs from 10% to 25% on USD200bn of Chinese goods. U.S. financial markets have been whipsawed over the past week, first by the dovish Fed news and relief on the trade front, but now by fears over slowing growth as the yield curve approaches inversion, where short term interest rates are higher than long term rates – a harbinger of a potential recession in 3-5 quarters.
