Economic data remains consistent with a slow growth environment, in our view. Although we believe there are downside risks to the outlook, we expect the economy to remain on a slow growth trajectory over the near- to intermediate-term. Third quarter GDP growth was revised up to 2.1%, and the consensus forecast calls for growth of 1.6% in the current quarter, and 1.8% next year. We continue to believe the impact of monetary policy on economic growth is somewhat lagged, and the more accommodative monetary policy stance of the Federal Reserve and other global central banks throughout 2019 should provide a tailwind for an ongoing slow economic growth environment heading into 2020. Nevertheless, unresolved trade conflicts, Brexit, and the upcoming US Presidential election creates uncertainty heading into the new year and potentially sets the stage for a more volatile financial market environment.

The Federal Open Market Committee (FOMC) has lowered the target fed funds rate by a total of 75 basis points this year to a range of 1.50%-1.75%. Since the most recent rate cut in October, members of the Federal Open Market Committee have indicated that the current stance of monetary policy is likely to remain appropriate as long as economic data remains consistent with their outlook. We believe the Fed hasn’t ruled out the possibility of providing further accommodation if the economy weakens further or inflation remains below their target. Furthermore, we believe the Fed is may allow inflation to slightly overshoot their 2.0% target before becoming more hawkish. The next Federal Open Market Committee meeting will be held December 10-11 and we do not expect the Fed to make any material changes to their policy statement or the summary of economic projections.

Treasury yields increased in November. The 3-month T-bill yield increased about 4 basis points in November to 1.57%, the 2-year Treasury yield increased nearly nine basis points to 1.61%, the 5-year Treasury increased almost eleven basis points to 1.63%, and the 10-year Treasury yield increased about nine basis points to 1.78%. We believe the increases were driven by more favorable developments with regard to global trade and Brexit which have also modestly pushed up European sovereign bond yields.