Economic statistics continued to provide a mixed message about thestrength of the economy, with trade and GDP figures disappointing but payroll and retail sales data showing some improvement. Inflation ticked up and core CPI hit 2.3% year-over-year, high enough to raise red flags for Fed watchers. In fact, the Federal Reserve meeting minutes released mid-month led a number of investors to believe that the Fed was moving toward a more hawkish stance.
Enthusiasm for the “Trump reflation” trade clearly waned, at least from the bond market’s perspective. An inability to concur on a replacement plan for Obamacare and controversies over immigration and presidential appointments pushed fiscal and tax policy discussions to the sidelines.