Industry Comments: Economic Growth Continues at Solid Pace; Yield Curve Remains a Challenge; Modest Loan Growth and Modest NIM Compression Expected in 3Q19
Economic readings continue to show growth for the U.S. as we near the end of 3Q19. While the economy is still showing healthy growth, the pace of growth has clearly slowed. Meanwhile, an inverted yield curve has led to substantial investor concern about the possibility of a recession occurring in the near future. Still, despite some volatility, stock prices continue to rise. Bad economic reports are viewed as further evidence that the Fed will continue to cut interest rates while good news is viewed as evidence that there is no recession coming. Either way, the market reacts favorably. Meanwhile, the trade dispute with China has remains a primary driver of short-term market swings. The markets are buoyed every time there is a hint that negotiations are back on. Then, each time negotiations end without an agreement, or there is a hawkish tweet about China’s trade practices, the markets slump. While, trade policy remains a significant worry for investors, inflation does not seem to be a major concern, despite a few recent readings that suggest inflation may be moving back towards the Fed’s 2.0% target rate