Exposure rates of the Dorval Asset Management Range – 2nd August 2019

The Fed’s insurance cut – slicing 25bps off its federal funds rate on July 31 – was criticised by some, but swiftly proved to be timely when Donald Trump ratcheted trade tension up further and announced 10% border tariffs on another $300bn in Chinese imports that had so far escaped taxes, applicable as of September 1.

This decision obviously further clouds the outlook for industry and world trade, but the key area for concern now is US consumer spending, which had held up well so far.

Trade tension and other recessionary forces currently affecting the world economy had primarily dented the manufacturing sector so far. Surveys with companies in this segment in the US show that the slowdown in industry continued in July (cf. chart 1) – and this is one of the factors that prompted Jerome Powell to announce a 25bps rate cut, the first time that interest rates have been trimmed since 2008.

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