Market Updates

• The yield on the two-year Treasury note dropped six basis points last week to 1.61%. GDP reported by the Atlanta GDP Now indicator reduced fourth-quarter GDP estimates to 0.4% from 1.0%.

• On Friday, weaker than expected Retail Sales of 0.3% was announced. The slowdown in consumer spending casts a dark cloud over the outlook, but we do not believe it foreshadows a major retrenchment. Some giveback from the torrid pace of consumption over the spring and summer months is not unusual, and households may just have taken a breather in September and October.

• Inflation has remained below the Fed’s 2% target and shows little sign of piercing that threshold anytime soon. Hence, while some view the Fed’s signal to put the rate-cutting cycle on pause at its October 29-30 policy meeting as a hawkish move, we see it more as a bridge leading to another reduction some time over the first half of next year.