Published October 11, 2019
Longtime readers of this column may recall that I often write that the market climbs a wall of worry. This year has been no exception.
In spite of raucous headlines and recurring bad news, the U.S. equity market has increased 18.2 percent this year through September. European and Asian markets (the MSCI EAFE index) are up 13 percent. The U.S. real GDP annualized growth rate is at 2 percent. Consumer confidence has remained strong. Inflation is subdued.
But U.S. economic production is slowing, as is capital spending and investment. Indeed, on the first day of the new quarter, the U.S. manufacturing survey (the ISM index) came in at the lowest level since June 2009; it was the second consecutive month of contraction. While business leaders and economists blame tariff wars, President Trump took Federal Reserve Chairman Jerome Powell to the whipping post, calling the Federal Reserve Board – his appointees – “pathetic.”
Consumer spending is about 70 percent of the U.S. economy, so when the consumer is happy, the economy is strong. The U.S. consumer is important to the world economy too. Right now the consumer confidence level is strong, although weakening with the slate of bad news.
The slowdown in capital spending is becoming more apparent. The International Monetary Fund has been warning about slowing for many months. We see it in Europe and Asia, and it is coming to the U.S. The long-term bull market has people thinking about a slowdown. When enough people think the economy is slowing, it becomes a self-fulfilling prophecy.
Adding to recession worries is the long-term trade conflict between the U.S. and China. The trade conflict has extended far beyond the […]