Daily Market Color June 11, 2019Risk Assets End Winning Streak as Tariffs Threatened Once More Jeff Davenport US equities end longest winning streak in two months as the outlook for trade talks diminishes yet again. In a tweet today, President Trump threatened to institute additional tariffs if Chinese President Xi Jinping does not agree to talks at this month’s G20 summit. For markets, the threat confirms that tariffs will be used as a preferred negotiation tool by the Trump administration for any number of disagreement the US has with other countries. The S&P 500 ultimately fell marginally lower by 0.04% – led lower by industrials and utilities. The VIX or “Fear Index” remained subdued at 15.99. Purchaser Price Index edges up 0.01% in May, indicating a continued low level of inflation. On an annualized basis the latest figure puts PPI growth at 1.8% – missing estimates that called for a 2% annualized increase. Tomorrow will bring May’s consumer inflation/CPI release, the markets preferred measure of inflation, which is expected to rise by 0.1% in the month of May (1.9% annualized). While the President has referred to low inflation as a “beautiful thing,” the Fed is unlikely to even consider raising rates until they see clear inflation signals above their 2% PCE target (a measure that typically lags behind CPI by ~0.4%). Treasurys climb as risk assets pull back, sending rates lower 1-2 basis points across the curve. It was a relatively quiet day for Treasurys, with rates falling slightly as risk assets traded lower on concerns around trade. The recent bond rally has pulled the global aggregate rate on long maturity sovereign debt to 1.18% – an astonishingly low rate. Fed funds futures now price in 50 basis points worth of cuts by the end of 2019, though the Fed will get a chance to confirm or deny these market expectations as early as next week when the FOMC makes its next rate announcement.