Most major equity markets struggled overnight, although there weren’t any major headlines driving activity. There were some articles expressing disappointment in U.S./China trade talks, but today’s action is more likely a breather from the rally in risk assets since the Christmas Eve meltdown. Treasury prices are little changed on the day, and various metrics of yield curve slope are modestly steeper. The markets continue to trade as if the Fed is done with rate hikes this cycle, but yesterday’s FOMC minutes (December meeting) and Fedspeak simply suggested more patience from Fed leaders with regards to future policy decisions. In other words, the Fed is likely on hold for now as they assess incoming economic data and ensure that the U.S. economy is on firm footing. If the data trend over the next 3-6 months aligns with their optimistic assessment, the FOMC would not necessarily be done with rate hikes this cycle.

Jason Haley
Managing Director, Investment Management Group