TELFPlus Investment commentary
Miles Capital, Investment Advisor
July 18, 2018
The Federal Reserve Open Market Committee (FOMC) raised rates 25 basis points to 2 percent at their meeting in June. There has been commentary in July that some committee members would like to slow the pace of increases, but we believe they are still on track to raise rates one to two more times this year in September and possibly December. The Federal Reserve continues to signal they will raise rates three times in 2019.
Treasury rate curve volatility has decreased since the first quarter and the majority of the movements have been to tighten the short and long ends. The 3-month Treasury rate increased 21 basis points, and the 2-year Treasury increased 26 basis points. The spread between the 2-year and the 10-year rate is now under 30 basis points, the lowest it's been in over a decade. Investors are not benefiting from a longer duration portfolio.
We are closely watching the trade discussions. The initial tariffs on $34 billion of Chinese goods were relatively minor. These took effect on July 6 and stayed clear of popular household products. However, recent commentary has included tariffs on nearly half of the $505 billion in goods the U.S. imported from China last year. If enacted, these additional tariffs could influence inflation, which could in turn influence Federal Reserve rate actions. It is still too early to determine the potential impacts as the tariffs may not become effective until after public consultations ending on August 30.
The views expressed herein are the current views of Miles Capital as the stated date and are provided for informational purposes only. They are believed to be correct, but accuracy and completeness cannot be guaranteed and should not be relied upon for legal or investment decision purposes. All expressions of opinion and predictions presented are subject to change wihtout notice. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any securit. Past performance is not a guarantee of future results.