Federal Reserve Chairman Jerome Powell, speaking Friday at the University of Zurich in Switzerland, gave mostly positive remarks about where the U.S. stands today.

“The Fed has through the course of the year seen fit to lower the expected path of interest rates. That has supported the economy. That is one of the reasons why the outlook is still a favorable one,” he said.

In July, the Fed lowered the target range for the federal funds rate to 2-2.25 percent, which was the first rate cut since the financial crisis. By the way, these rates affect among other things the cost of borrowing for credit cards and mortgages.

Markets at present expect another rate cut of 25 basis points at the FOMC meeting on September 17-18.

On the ongoing trade war between the U.S. and China and the impact it’s having on companies’ investment decisions Fed Chair Jerome Powell said “I think it is the case that uncertainty around trade policy is causing some companies to hold back now on investment. We’ve been hearing quite a bit about uncertainty. So for businesses, to particularly make longer-term investments in plants or equipment or software, they want some certainty that the demand will be there.”

On the probability of having to face a recession in the U.S. in the foreseeable future, the Fed Chair said “We’re not forecasting or expecting a recession. The most likely outlook is still moderate growth, a strong labor market and inflation continuing to move back up. Our main expectation is not at all that there will be a recession.”

On Friday, all three major U.S. market indices ended the week higher hereby reflecting/confirming some kind of a relief rally as last week as quite a number of things had started moving in the right direction, especially for equity bulls.

We had:

• In the UK, last week’s Brexit vote boosted global shares as the chances for a “hard” Brexit had clearly diminished.
• China and the United States agreed on Thursday to hold high-level trade talks in early October in Washington.
• In Hong Kong we’ve seen Chief Executive Carrie Lam Cheng Yuet-ngor’s stunning U-turn in officially withdrawing her extradition bill. That said, it could also be important to take note that Beijing has taken a very measured response so far, the South China Morning Post reported.
• Last week, Italy got a new government, which is by the way its 67th since World War II and markets have cheered the new incoming coalition on, among other things, the prospect of smoother relations with the EU, CNBC reported.
• Because of its slowing economy, China has cut the banks' reserve ratios, hereby freeing up $126 billion for loans as the economy is slowing. The reserve requirement ratio (RRR) has been cut by 50 basis points (bps) for all banks, with an additional 100 bps cut for qualified city commercial banks. The OECD has estimated that China’s fiscal stimulus was equivalent to 4.25 percent of gross domestic product (GDP) in 2019, up from 2.94 percent in 2018, Reuters reported.

Now, not one of these issues has been fixed for good (in any way), but they have been postponements in to the future and all that has seemed to be enough for a relief rally.

Besides all that, in the U.S. we got a real good August 2019 Non-Manufacturing ISM Report on Business (NMI) that came in at 56.4 percent, which is 2.7 percentage points higher than the July reading of 53.7 percent. This represents continued growth in the non-manufacturing sector, at a faster rate.

The Non-Manufacturing Business Activity Index increased to 61.5 percent, 8.4 percentage points higher than the July reading of 53.1 percent and reflecting growth for the 121st consecutive month.

The New Orders Index registered 60.3 percent; 6.2 percentage points higher than the reading of 54.1 percent in July.

The ISM Non-Manufacturing Employment Index registered 53.1 percent, a decrease of 3.1 percentage points from the July reading of 56.2 percent.

The Prices Index increased 1.7 percentage points from the July reading of 56.5 percent to 58.2 percent, indicating that prices increased in August for the 27th consecutive month.

All that is very good news.

For investors that are disposed to take on some risk, I’d like to say that the current risk rally seems to me at least to have some more legs …

Of course, every investor must make their own decision.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.