Financial markets have started 2019 off on the right foot following widespread losses last year. Political factors that weighed on markets in 2018 have edged in a positive direction in January.
First, Federal Reserve Chairman Jerome Powell on January 4th used the word “patient” to describe the Fed’s approach to raising interest rates. This helped to soothe fears that the Fed would hike rates too quickly and smother the economy. Powell’s more relaxed tone comes after a string of data showed continued low inflation in the U.S.
Second, the U.S. and China will reconvene trade talks this week. U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He will help to lead the negotiations, a sign that both sides are eager to reach an accord. March 2nd is the deadline for a deal before the U.S. again raises tariffs on Chinese goods, so a deal must come swiftly or trade-related market volatility could re-emerge.
Elsewhere, the federal government has fully re-opened following a month-long shutdown. Although many federal workers and contractors were harmed by the shutdown, financial markets gave little notice, with the S&P 500 rising 13% during the impasse.