UBS On-Air: Market Moves

China’s July trade data showed ongoing growth in exports—some of this reflects re-exporting. The gap between what China says it is selling to the US and what the US admits to buying from China has reached extraordinary levels. China’s market share of US non-oil imports is 13.2% (China export data) or 8.4% (US import data). This suggests China’s US customers have become adept at avoiding tariffs, supporting China’s export sector.

Markets’ responses to last Friday’s US employment report rebuke US monetary policy communication. The report showed strong payrolls growth, but unemployment rates drifted very slowly higher. The labor market is not creating accelerating wages. Market rate hike expectations increased, but the decision is still essentially a coin toss. With a clearly communicated framework for monetary policy, markets would not be plagued by such indecision.

With inflation and labor data providing a mixed picture on the Fed’s dual-mandate goals, the Fed faces a closely balanced decision between a rate hike and a hold. This episode explores what either outcome could mean for the yield curve, equity valuations, and portfolio positioning in an environment of uncertain policy outlook.

Shane drops by ahead of the Labor Day holiday weekend to update on this week’s developments up on Capitol Hill, including Congressional efforts to keep the government funded, and progress on the Open-Source AI Leadership Act. Plus, an update on renewed military tensions between the US and Iran. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

In the unnecessarily uncertain world of US monetary policy, we heard from Federal Reserve Governor Waller. Waller signaled a desire for unchanged policy, as disinflation forces seem to continue. If disinflation ceased, then Waller would reconsider. This is similar to New York Fed President Williams’ outlook. These two Fed members command more respect than some other Fed members, and their words moved markets.