Trade Talk and Fed Minutes Highlight Short Week

Feb 19, 2019
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Trade Talks and Fed Speak 

In this holiday-shortened week the data is further confined between today and Thursday. The highlight will be tomorrow’s FOMC minutes from the January meeting where the dovish turn of the Fed was on full display. While we know the substance of the meeting was a likely rate-hiking pause for several meetings, we’ll be interested in the discussions surrounding the latest estimates of the neutral rate and the concern, if any, with the gathering global slowdown. Away from the Fed we expect to hear some happy talk regarding trade negotiations with China as the March 1 tariff deadline approaches. If history is any guide we expect the deadline to be extended and soothing words offered regarding the state of the talks. That should provide some room for equities to rally and put a little pressure on Treasuries. January existing home sales and the Leading Index should provide a lift to equities as well with a small but positive uptick in January after a tough December. 



Short-Term Rates

Short-term Rates

Economic Calendar

Economic Calendar


calendar icon Top 5 Events for the Week

FEB 19 - 22, 2019

1. Trade Talks—All Week 

2. FOMC Meeting Minutes & Fed Speak –Wednesday

3. December Durable Goods Orders—Thursday

4. January Leading Index—Thursday

5. January Existing Home Sales —Thursday



1.  China Trade Talks–All Week

With the government now funded through September attention can turn to  the ongoing China trade talks. We expect that we’ll be greeted this week with positive headlines and a possible extension of the March 1 tariff deadline.  That should provide a positive backdrop to equities and concomitant pressure on Treasuries. We don’t, however, expect that pressure to lead to any material back-up as investor concerns with the global slowdown story and consumer spending in the first quarter after a dismal December should act to keep the long-end range bound.


2.  January FOMC Minutes and Fed Speak —Wednesday

While the policy substance of the January meeting is already out in the open, other discussions at the meeting will be informative. We will be interested to read members’ views regarding the latest estimates of the neutral rate and whether we are at, above, or below that rate given a 2.50% upper bound fed funds level. We also want to see whether there were substantive discussions regarding the global slowdown story and how much concern was expressed. It obviously had some impact on the dovish turn by the Fed but we’d like to see the extent of the discussions that revolve around that issue as it could be a continuing driver of a rate pause if the slowdown deepens.


3.  December Durable Goods Order-Thursday

The release of this report was delayed by the government shutdown and so it’s a bit dated but it could fill-in some pieces to what is quickly looking like a tough December. The retail sales report last week was dreadful but the durable goods  numbers are expected to see a rebound after a weak November. Perhaps the durable goods sector was quicker on the slowdown switch than the consumer but faster on the uptake? In any event the headline orders number is expected to be up 1.7% versus 0.7% in November. Durables less  transportation are expected to be up 0.3% versus –0.4% the prior month. Shipments of goods less defense and air— a proxy for  business investment—are expected to be up 0.1% versus –0.2%. So a decent read from the durable goods sector in December is expected compared to the weak consumer retail sales numbers that we saw last week. 


4.  January Leading Index —Thursday

The Conference Board’s Leading Index is a compilation of metrics that tend to lead the economy and the index, but perhaps more important these days it also has a solid track record of predicting recessions. As the chart below shows, the index always falls well below zero prior to a recession and currently the index has been flirting with the zero-level. The index, however, will need to move below-1.0 to provide a more reliable recession signal. That being said, the January number is expected be up 0.2 versus –0.1 in December. If that comes to pass it will be another signal that while a slowing economy is expected, the probability of dipping into recession remains slight.


Leading Economic Index and Recessions


5.  January Existing Home Sales —Thursday

The housing market has become a key tell in trying to divine whether the economy is truly headed south or is just settling into a lower but steadier pace. Existing home sales account for nearly 90% of the residential market and as such gives us the broadest view of its health, but with data based on closings it can be a bit dated. January existing home sales are expected to have increased ever-so-slightly to 5.00 million annualized units versus 4.99 million in December. The average over the past year has been 5.34 million annualized so in keeping with recent housing releases a below-average print while being nearly unchanged month-over-month.




arrow up icon Investment Yield Ranges Over Last Year


US Treasuries

FHLB Agency Bullets

Mortgage Backed SecuritiesMunicipals

US Corporate - Financials

US Agency Swap Rates

 Source: Bloomberg





Tom Fitzgerald Signature

Thomas R. Fitzgerald

Director, Strategy & Research



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