November 2018 Economic Recap
Global market turmoil continued into November, as financial conditions tightened amidst a sell off in stocks along with rising interest rates and a stronger dollar. Continuing trade tensions between the U.S. and China drove the S&P 500 into correction and sent the VIX to its highest level in more than a year. Meanwhile, bearish signals extended into the bond market, where the 2-5-year portion of the Treasury yield curve inverted. This is less noteworthy than an inversion of the 2 and 10 year, however it stands a clear warning sign that the economy is reaching the late stages of the cycle.
These developments have bled over to Fed policy. While it is still almost guaranteed that the FOMC will raise rates again in December, it now seems likely that the will reassess their projections for rate hikes in 2019. The September SEP showed that the majority of Fed officials projected 3-4 hikes in 2019 (keeping with the pace of one roughly every other meeting). However, Fed officials are now acknowledging that this pace of tightening is unrealistic, and thus are expected to roll back their projections at the December meeting. Currently, fed futures markets are pricing in roughly a 50% chance of a single hike next year.
For a deeper consideration of the economic data released during November, please follow the links below: