October 2018
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National Non-Operating Observations
As expected, the Federal Reserve raised its target interest rate range to 2.00-2.25 percent at its September meeting, marking the highest rates since October 2008. Commentary from the meeting suggests that the Fed will continue increasing interest rates over the near term, with projections indicating another hike at the December meeting and three increases in 2019. Economic fundamentals in the U.S. remain positive, with the unemployment rate dropping to 3.7 percent (its lowest rate since 1969) on the strength of an increase in non-farm payrolls of 134,000. The average American worker’s hourly salary rose 0.3 percent to $27.24, a 2.8 percent year-over-year increase.
Foreign trade politics have continued to dominate headlines. In September, the Trump Administration announced a 10 percent tariff on $200 billion of Chinese imports, with the tariff rate expected to rise to 25 percent by 2019. China retaliated with $60 billion worth of tariffs on U.S. goods, and cancelled upcoming trade talks. The U.S., Mexico, and Canada also announced a “new NAFTA,” which would amend various provisions of the original free-trade agreement.
†2Q 2018 Bureau of Economic Analysis "third" estimate
*60/40 Asset Allocation assumes 30% S&P 500, 20% MSCI World, 10% MSCI EM, 40% Barclays Agg.

September 2018
Month Over Month Change (bps)
Year Over Year Change (bps)

GDP Growth
Unemployment Rate
Personal Consumption Expenditures
30yr MMD
30yr Treasury
Monthly Return on 60/40 Asset Allocation*
Non-Operating Assets
Despite volatility in the early part of 2018, U.S. and World markets have moved steadily higher in recent months, with the S&P 500 index up 9.0 percent year to date (with 7.0 percent of that increase since June) and the MSCI World index up 3.8 percent (with all of that increase since June). Emerging markets have struggled, reflecting currency and growth concerns in several large emerging market countries. The MSCI Emerging Markets index is down 9.5 percent year to date, and has lost ground in seven of the last nine months. Bond investments have decreased with the corresponding increases in long-term rates (prices and yields move in opposite directions). The Barclays Agg index is off 1.6 percent this year, losing 0.6 percent in September alone.
Strong earnings growth from U.S. companies in 2018 to date, and a positive overall macroeconomic picture have continued to support the stock market. Thus far, markets have not been impacted materially by implementation of tariffs between many of the world’s largest economies. As these events continue to unfold, it’s possible that tariff-induced GDP “drag” could create market volatility.
Long Term
Last Twelve Months
Long Term
Last Twelve Months
Non-Operating Liabilities
In September, the 30-yr U.S. Treasury yield increased by 0.19 percent (ending at 3.21 percent) and the 30-yr MMD Index increased by 0.18 percent (ending at 3.19 percent). Both of these indices are near their 12-month highs, driven largely by the strength of the U.S. economy as reflected in GDP growth and employment, and the actions of the Federal Reserve.
Over the past 12 months, investment fund flows have been quite volatile, with several months of moderate-to-large inflows interspersed with three months of $1 billion or more in outflows, for an average of $1.7 billion in inflows per month. September was essentially flat, with $3 million in outflows, a slowdown that added to upward interest rate movement.
Long Term
Last Twelve Months
Long Term
Last Twelve Months
National Observations
National Observations
©2018 Kaufman, Hall & Associates, LLC
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