Week In Review 1.11.2019

Markets recorded solid gains buoyed by optimism regarding U.S./China trade talks and renewed supportive comments by Fed Chair Jay Powell. Last year’s underperforming asset classes- emerging markets and small caps- and sectors- energy, industrials, communication services- largely led the way.

U.S./China trade talks, initially scheduled for two days, were extended to three, as the two sides appeared to make strides on a number of issues.  Following the conclusion of the talks, reports indicated that the two sides are working to schedule higher-level talks for later this month.

Speaking before the Economic Club of Washington, Fed Chair Jay Powell reiterated his welcome message from last week that the Fed will be patient moving forward with monetary policy. That message was corroborated by the minutes from the Fed’s December FOMC meeting, which showed that participants were more cautious than the statement released at the end of the meeting implied.

According to the minutes, participants “expressed that recent developments, including the volatility in financial markets and the increased concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier.”  As a result, “many participants expressed the view that, especially in an environment of muted inflation pressures, the Committee could afford to be patient about further policy firming.”