![](/sites/default/files/styles/1086x410/public/week%20in%20review%20video_0.jpg?itok=lHvYlzT0)
Market Week in Review: Does the latest U.S. inflation report strengthen the case for another rate cut?
Markets rise on positive news surrounding trade, Brexit
The latest round of trade negotiations between the U.S. and China kicked off Oct. 10 in Washington, D.C. So far, the talks have been positive, Robison noted, with the possibility that the U.S. will scrap a planned Oct. 15 tariff increase on Chinese goods. In addition, China may commit to purchasing more soybeans from the U.S., and the two nations may also strike a deal that would prevent currency devaluation.
“All in all, this is modestly positive news,” Robison said, adding that both the S&P 500® Index and the Dow Jones Industrial Average were up over 1.5%, as of mid-morning Oct. 11 Pacific time, on the news.
He also noted that the latest developments surrounding Brexit appear positive as well, with negotiators from the European Union and the UK expressing optimism that a potential divorce deal may come together prior to the UK’s scheduled departure date on Oct. 31.
Soft September inflation numbers increase odds of Fed rate cut
The U.S. Consumer Price Index (CPI) for September, released Oct. 10 by the Labor Department, came in a bit on the soft side, Robison said. “The CPI was flat in September, with consumer prices unchanged—which means there wasn’t much inflation,” he explained. This reading strengthens the case for the Fed to cut interest rates for a third time this year at its upcoming Oct. 29-30 meeting, Robison said. “In our view, there’s probably an 80% chance that the Fed will do just that,” he noted, adding that another rate cut would help send equity markets higher.
Fed to increase balance sheet by buying Treasury bills
The Fed announced on Oct. 11 that it will increase the size of its balance sheet by purchasing short-term Treasury bills starting Oct. 15, Robison said. While this may look similar to the quantitative easing (QE) program started by the central bank to combat the Global Financial Crisis, it’s clearly not QE, he stated.
“QE involved purchasing longer-term bonds and mortgage-backed securities. This deals with purchasing normal short-term Treasuries in order to remedy last month’s rate spikes in money markets,” Robison explained. The key takeaway here, he concluded, is that this amounts to normal operations by the Fed to try to stabilize the demand for money.
CORP-11548
Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
Russell Investments Financial Services, LLC, member FINRA, part of Russell Investments.
For information on the Financial Industry Regulatory Authority, go to www.finra.org.
Products and services described on this website are intended for United States residents only. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.
Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with minority stakes held by funds managed by Reverence Capital Partners and Russell Investments’ management.
Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the “FTSE RUSSELL” brand.