 |
Global Growth Slowdown
We have previously discussed how inverted yield curves are considered a reliable predictor of economic recession (see
Interpreting the Yield Curve Message
). And we've shown how the slope of the yield curve has flattened here in the US, especially over the past year. Today's chart looks at yield curves from other countries relative to our own.
The exhibit below details the 30 year bond yields from 11 different countries versus the US Federal Funds rate. What we see today, is an inversion similar to what preceded the collapse of the dot.com bubble and the global financial crisis (the three shaded periods).
While the US yield curve has
not inverted, the US is not immune to the impacts of a slowdown in the rest of the world. Last month the International Monetary Fund downgraded its forecast for world growth.
Since the IMF's latest World Economic Update on October 9, global stocks have slumped on concerns that rising interest rates and the US-China trade war could undermine growth.
Thus far, US GDP has been mostly unaffected by the global slowdown, but forecasts for 2019 are trending lower as the effects of the Trump administration's tax cuts begin to fade and as concerns over an escalating US-China trade war continue to grow.
What to watch
Market participants were eagerly awaiting a speech from Federal Reserve Chair Jerome Powell today. His comments
in early October helped set off a rough period on Wall Street, after he said the Fed was "a long way" from neutral. However, today he said, interest rates "remain
just below the broad range of estimates of the level that would be neutral for the economy - that is, neither speeding up nor slowing down growth." Traders interpreted his comments to mean the Fed may be less aggressive with rate hikes than it had previously suggested; equities immediately soared.
The financial community will also be closely watching the meeting between President Trump and Chinese President
Xi Jinping at this week's G-20 summit in Argentina. Economic Adviser Larry Kudlow has said
there have been "significant" preparations in the lead-up to this weekend's meeting with each leader briefed on issues and armed with talking points. The world will be watching in hopes that one of the biggest threats to global growth - a growing trade war between the two economic superpowers - can be avoided.
|
|
|
During the Thanksgiving holiday-shortened trading week, the S&P 500 gave back all of its gains on the year and fell into negative territory. The tech-heavy Nasdaq performed the worst, dragged down by the FAANGs - all of which entered bear market territory (off 20% from recent highs) by Tuesday of last week. Energy stocks were particularly weak thanks to the continued slide in oil prices. Trade worries continued to weigh on investor sentiment and economic data released last week was generally disappointing.
|
|
> Oil Prices:
There was no let up in oil prices last week. By Friday, West Texas Intermediate (WTI) crude closed at $50.42/barrel. That is a 14.5% drop since one year ago, and a 34% drop since the recent high on October 3 of this year. Fears of a global glut and concerns about world economic growth have driven prices lower. Though prices have bounced back somewhat this week, most analysts expect pricing to remain volatile.
|
|
|
Source: Markets Insider / Commodities
|
> Consumer Sentiment:
The University of Michigan's Consumer Sentiment index came in at 97.8 for November which was below expectations, but still strong. Consumer sentiment has remained largely unchanged at very favorable levels during 2018, with the November reading nearly at the center of the eleven month range from 95.7 to 101.4. Although the data recorded a decline of 2.8 index points following the mid term elections, the drop was related more to income than political party.
> Existing Home Sales:
One bright spot last week was a turnaround in existing home sales. Breaking a six-month streak of declines, sales increased 1.4% from September to a seasonally adjusted rate of 5.22 million in October.
|
|
The All American Sport: Deal Hunting
"Doorbuster" deals on Black Friday followed by Cyber Monday promotions, kicked off the US holiday shopping season and the totals are already in. The American sport of deal hunting and conspicuous consumption has not disappointed.
According to Adobe Analytics, American consumers spent $7.9 billion on Monday,
making it the biggest online shopping day in US history. Although foot traffic in traditional brick and mortar stores was down, consumers still spent over $6 billion at retailers on Black Friday. Of course these spending figures still pale in comparison to China's $30+ billion "Singles' Day" shopping bonanza on November 11th each year.
Traditional players like Walmart, Target, Best Buy, Kohls and of course, Amazon, have emerged as early winners signalling
that retailers got a lift from a strong economy, convenient new ways to spend, and the demise of former rivals like Toys R Us.
|
|
New Market Wealth Management offers modern investment solutions backed by extensive research and experience serving the needs of wealthy families. Through our strategic partnership with
Cliffwater LLC
, we have access to institutional-quality research, investment due diligence and asset allocation tools. We believe this level of experience and unique access to in-depth, sophisticated research are essential for success in today's complex world markets.
|
|
|
|
| |
|
|
|
|
