U.S. stocks continued their trek higher in October, which was fueled by better than expected corporate earnings, traction with China on a trade deal, and an additional interest rate cut by the Fed. Many market pundits had expected third quarter corporate earnings to take a hit from trade-related headwinds, but in fact close to three quarters of S&P member companies that reported in October beat analyst estimates. These results have helped to allay fears of an imminent recession. The war of words with China finally started to cool this past month with the announcement of a “Phase 1” trade agreement on October 11th. While nothing has officially been signed yet, the agreement addresses areas such as intellectual property, financial services, and agricultural products. The most important part of Phase 1 is that it puts future tariffs on hold. This is by no means the best possible outcome, but it is a start to reversing the damage done to the economies of both countries from useless tariffs. More positive news came on October 30th when the Fed cut interest rates for a third time this year. Interest rate cuts tend to have a delayed effect on the economy. It is for this reason we believe benefits will likely start to accrue late this year and into early next year. Given the Fed’s stance on monetary policy, strong U.S. consumer spending, and a moderately improved trade situation with China, we believe equity markets will rally into year-end.