What a difference a quarter makes! Or, rather, what a difference a security blanket (the suggestion of accommodative Fed policy) can make. With trade uncertainty and disappointing manufacturing data, virtually non-existent inflation and slowing housing metrics, expectations increased for a renewal of monetary accommodation in the second half of 2019. After laying the groundwork in January with the introduction of dovish language, the Fed signaled an openness to cut rates during its June FOMC meeting, confirming as long suspected – the Fed is following rather than leading the markets. By second quarter-end, the probability of a July cut was priced in with near certainty. Perhaps more remarkably, the market began to price in roughly four cuts by the end of 2020. Taking stock of where we stand today, monetary policy has come full circle as investors once again receive succor from central bankers. It is not just the Fed - ECB President Mario Draghi delivered a boost to global markets as he indicated that additional monetary easing could be on the way, with a seemingly low bar for central back action. While the 10-Year U.S. Treasury yield revisited sub-2% (last seen in 2016), French 10-year yields fell to zero for the first time to bring the total global stock of bonds yielding below-zero near 2016’s record level of $12.2 trillion...
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