The risk-off trade in global markets continues this morning, with Treasuries well bid and equities lower. Treasury yields were initially higher overnight until a Reuters article was released reporting that Chinese officials had “backtracked” on essentially all major U.S. demands, including intellectual property theft, forced technology transfer, competition policies, and currency manipulation. If true, this further reduces the odds of a deal being struck prior to Friday’s deadline, at which point U.S. tariffs on Chinese goods will increase to 25%. Fed Governor Quarles echoed Jerome Powell’s position on recent inflation readings during a speech yesterday. “Inflation is difficult to measure precisely,” said Quarles. “From my point of view, 1.8% is 2%…I would not undergo heroic efforts, including rethinking our monetary policy framework or significant monetary policy stimulus, in order to edge 1.8 up to 2.” Quarles conditioned his comments by noting that if inflation “were at 1% forever you would have a different issue.”

Jason Haley
Managing Director, Investment Management Group