Market Review: “What is it that you would like me to do, sir?”
Having foreshadowed a willingness to renew monetary accommodation as early as January of this
year, perhaps the Fed could be lauded for holding off action until the third quarter against the
withering criticism from the President and intermittently volatile markets. But capitulate it finally
did, not once but twice, with an ease of 25 basis points in September to follow one in late July, which
had marked its first cut since 2008. What was notable in the redirection of policy, as highlighted
by the latest meeting minutes, was a lack of consensus versus the past, underscoring uncertainty
(and dispersion of opinion) among the FOMC members. The broader viewpoints suggest increased
risk of policy error, particularly in the face of unrelenting political pressure. However, it wasn’t as
if the more dovish faction was without support for its perspective: since the start of the year, trade
tension and its fallout disaffected economic measurables in a meaningful way. As a result, global
recessionary concerns mounted in the third quarter, particularly in Europe where the IHS Market
Eurozone composite PMI, which captures both manufacturing and services activity, fell to 50.4 in
September, the lowest reading since June 2013, and German manufacturing PMI fell to a 10-year
low. Trade concerns have taken a toll on U.S. manufacturing as well, with the PMI here falling into
contraction territory for the first time in three years. Not surprisingly, businesses remain skeptical
of the prospective environment, as evidenced by sharp declines in survey-based measures of
expectations, confidence, and spending decisions...
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