At what point does economic resilience give way to political reality? No one’s really sure, but the Trump administration continues to press its trade-war policy and the macro blowback continues to mount. Let’s be clear: the United States economy continues to expand at a moderate pace and the risk of recession remains low for the immediate future. But investors are waking up to the fact that the White House’s policy on trade, if it continues, will probably be a critical catalyst that triggers the country’s first recession in a decade.
Macro Briefing | 3 October 2019
US set to impose tariffs on European goods after WTO ruling: WSJ
Trade worries weigh on equities: Reuters
N. Korea says it tested a new submarine-based ballistic missile: CNBC
Does the US-China trade war threaten US manufacturing jobs? Axios
PMI survey data confirms Eurozone economy virtually stagnant in Sep: IHS Markit
Germany’s economy contracted in Sep, PMI survey data shows: IHS Markit
US job growth in Sep (via ADP data) slows to 8-year low for 1-year change:
Risk Premia Forecasts: Major Asset Classes | 2 October 2019
The Global Market Index’s expected risk premium ticked higher in September, reaching an annualized 4.7%, up slightly from last month’s estimate. Compared with a year earlier, however, the projected long-term risk premia for GMI has slipped from a 5.0% estimate at this point in 2018 (see table below). GMI is an unmanaged market-value-weighted portfolio that holds all the major asset classes (except cash). The forecast for this passive benchmark represents the ex ante premium over the expected “risk-free” rate for the long term.
Macro Briefing | 2 October 2019
When does slowing US economic growth trigger a recession? Bloomberg
Today’s ADP employment report will be widely read after weak mfg data: CNBC
Atlanta Fed’s GDPNow model trims US Q3 growth estimate to 1.8%: Atlanta Fed
Global mfg activity continued to slide in September: IHS Markit
World Trade Organization lowers forecast for trade growth: WTO
US construction spending continued to decline in Aug in annual terms: MW
US Mfg PMI: output grew at a slightly faster but still sluggish rate in Sep: IHS Markit
US ISM Mfg Index fell deeper into contractionary terrain in Sep: CNBC
Major Asset Classes | September 2019 | Performance Review
Foreign stocks in developed markets rebounded in September, posting the strongest performance for the major asset classes last month. The gain was coupled with a sharp loss for bonds in foreign developed markets—September’s deepest setback.
Macro Briefing | 1 October 2019
Secretary of State Pompeo was on Trump’s July 25 Ukraine call: WSJ
Trump sought help from Australia’s PM to probe Mueller investigtion: NY Times
Chicago Fed president: US GDP on track for ‘solid’ 2.25% growth in 2019: WSJ
UK mfg downturn continued in Sep as job losses accelerated: IHS Markit
Eurozone Mfg PMI confirmed: activity fell at deepest rate since 2012: IHS Markit
Japan rolls out consumption tax, raising risks for economy: BBC
Japan’s mfg contraction deepened in Sep based on PMI survey data: Reuters
Dallas Fed Mfg survey: growth continued at slower pace in Sep: Dallas Fed
Chicago PMI slips back into contraction in Sep: Chicago PMI
Gold fell to 2-month low at end of third quarter: MW
US REITs, Bonds Offered Respite From Last Week’s Equity Losses
Most corners of global markets fell last week—with two conspicuous exceptions: US-listed real estate investment trusts and bonds, based on a set of exchange-traded funds. Otherwise, red ink prevailed.
Macro Briefing | 30 September 2019
Whistleblower in impeachment investigation expected to testify soon: WSJ
Trump demands to meet whistleblower; warns of “Big Consequences”: The Hill
China doubles security forces in Hong Kong, according to estimates: Reuters
Trump administration minimizes reports of limiting US investments in China: BBG
Chicago Fed president is “open-minded” to further rate cuts: CNBC
Forever 21 is latest US retailer to go bust: Reuters
China mfg sentiment is firmer than expected in September: CNBC
Firmer retail sales in German allay recession threat from manufacturing: Reuters
Jobless rate in Eurozone fell to 11-year low in August: MW
US consumer spending cooled in August: Reuters
10-year Treasury yield hinting at renewed downside momentum:
Book Bits | 28 September 2019
By Robert J. Shiller
Review via MarketWatch.com
Sometimes investors remain upbeat in the face of no shortage of what economists would otherwise consider to be terrible news. At other times they get spooked by what otherwise appears to be a mere hiccup.
This inherent difficulty of economic forecasting is a theme that has been the focus of recent research by Yale University finance professor (and Nobel laureate) Robert Shiller. In his recently-published book “Narrative Economics: How Stories Go Viral and Drive Major Economic Events,” Shiller contends that “If enough people begin to act fearfully, their anxiety can become self-fulfilling, and a recession, sometimes a big one, may follow.”
Continue reading
US Stocks Continue To Lead World’s Major Equity Regions In 2019
Global diversification across equity markets is a dud this year compared with a strategy of favoring American shares. Although all the world’s major equity regions are reporting year-to-date gains, US shares continue to lead, in most cases by a wide margin, based on a set of exchange traded products.