U.S. Fundamentals Continue to Remain Generally Strong but Market and FED Looking at Downside Risks

As stated in our previous note, many economic indicators remain strong. However, some recent economic data and trade uncertainties have increased the market projections of a potential Federal Reserve (Fed) rate cut. The Fed announced earlier this year that instead of raising rates two times during 2019, they would pause as they assimilated new economic data.

The Fed is concerned about how potential tariffs may affect the economy. And while measured inflation still remains relatively low, the Fed is closely monitoring since economic growth has been strong. There has also been some mixed data recently, including a fairly weak May non-farm payrolls number (representing employment changes). This payroll number, released June 7, showed an increase of 75,000, but the market had expected 175,000. Unemployment still remains very low at 3.6%.

It is important to note that the expectations for a rate cut are changing daily and we should get more clarity from the Fed when they meet June 19. It is also important to note that using the Federal Funds futures as an indication of what the Fed will do has not always been historically accurate.

At Miles Capital, we still believe that the economy remains relatively strong; however there are clear uncertainties. We will be watching the results of tariff discussions and indications from the Fed meeting June 19. We are also assessing other risks such as worldwide growth deceleration, inflationary pressures, and continued uncertainty around Brexit.


The views expressed herein are the current views of Miles Capital as the stated date and are provided for informational purposes only. They are believed to be correct, but accuracy and completeness cannot be guaranteed and should not be relied upon for legal or investment decision purposes. All expressions of opinion and predictions presented are subject to change without notice. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is not a guarantee of future results. Diversification does not ensure a profit or protect against market loss. As with all strategies, there is a risk of loss or all or a portion of the amount invested.