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Will a Trade War Push the U.S. Economy Into Recession?

Year to Date Performance

For the S&P 500, year to date performance through August 30 has been 16.74 percent this year. This is a great performance no matter how we look at it. Investors, really all of us tend to extrapolate past great performance into the coming months. It is in my opinion that the results will temper somewhat going forward as we have to face some pretty strong headwinds.

 

Holding the Media's Attention

Well,  Folks: 

 

This President is exceptionally good at holding the media’s attention on many subjects. This time around it seems to be we are stuck in the tariff trade war fiasco. The % numbers on tariffs and the dollar size of the items are certainly large numbers worthy of our attention.

 

 

Many Factors to Consider

Well, folks: 

There is plenty of new data that could influence the future direction the market takes. An inverted yield curve has been accepted as one of the better indicators of slowdowns/recessions in the making. Of the five recent periods of “meaningful inversion” (enough days to be considered credible by the Wall Street pundits) three delivered recessions, one false alarm and this one in 2019 is noted as too soon to tell. The current indications have been enough to push

May's Stock Market Was Certainly No Stroll In The Park

Well, folks:

There were plenty of reasons for the volatile month of May. The big fears were centered on the likelihood of slowing growth in all major worldwide economies. This fear immediately pushed down interest rates meaningfully in the US and produced an inverted yield curve for better than two weeks. Following quickly, business confidence dropped, exports showed signs of weakening and corporate investment also showed signs of retreating. Failure to reach a trade agreement with China and the threat of an immigration based tariff imposition on Mexico, left the US markets shaken.

May's Forecast

Well, folks:

The month of May has been off to a volatile start. However, our economy is not the problem. Going into the New Year most major research on our economy suggested a slowing of growth in the U.S. On May 10th for the first quarter of 2019,

 

Examining The Data

Well, folks:

Economic conditions and economic performance during the last quarter has resembled the velocity and stability of a roller coaster. At the beginning of January 2019, most economic forecasters didn’t foresee much in rate increases for the year. In fact, possible rate cuts and flat earnings growth seemed to dominate thinking for 2020.  However, the 1st quarter of 2019 delivered a broad-based performance surprise for the record books. In fact, for the S& P 500, it was the best rebound since 2009 *. The rebound appeared to be fueled by more of P/E expansion ( confidence) than earnings growth as the rate of growth has actually been slowing.

The Market Under Scrutinity

Well, folks:

The current economic expansion continues to slow. By way of comparison since 1960, we have registered six economic expansions which have averaged 27 months in duration. Averages, of course, are made up of different returns earned in different years divided by the number of those years. 

After The Shutdown

Well folks as you might imagine a government shutdown leaves many industries without the daily data to run their business properly. Our Government, like our commerce, is data dependent too. Patching together the data we can see residential real estate has slowed somewhat. For the fourth quarter of 2018, the segment grew at a 4.1% year over year rate which is the slowest pace since 2011.

Growing Prosperity Through Trade

Well, folks:

If you think that the trade issues between the U.S. and China are one of our most pressing global concerns, you are in the majority. If you think you aren’t getting the complete story or picture on the issues from the print press or broadcasters you are with the majority again.