Quarterly Review & Outlook-3rd Quarter 2018

It ain’t the heat, it’s the humility.”

‐ Yogi Berra

Trade wars make for good headlines, but investor attention is more closely trained on the

recent strength of the U.S. economy, and what it means for monetary policy and interest

rates. The Fed is the thermostat1 keeping the economy a nice, constant temperature

despite occasional extreme weather outside. You only notice the thermostat if it breaks.

The recovery from the last recession was long because it was slow. Households,

corporations, and governments retrenched at the same time, leaving the Fed alone on

one side of an epic tug‐of‐war battle. It could have been better, but it could have been

worse, and indeed it was worse in Europe and elsewhere.

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