Growth is slowing. See green line. For $1.5t cost re 2018 Tax Cut for corporations, slowdown was delayed by one quarter.
Note: Q3 estimate is now 1.8%, up from 1,3% when this chart was produced. t.co/HzniBZEVMG
— Anil (@anilvohra69) October 7, 2019
– $20 Trillion monetary stimulus
– $30 Trillion of fiscal stimulus and new debt
– Negative real and nominal rates.
— Daniel Lacalle (@dlacalle_IA) October 7, 2019
Credit bubbles build up when private sector debt growth rapidly outpaces GDP growth during an economic expansion. Some of the world’s biggest financial crises have followed from this unsustainable pattern. China, Canada, Australia pose serious risks today. pic.twitter.com/hioraD2J8R
— Kevin C. Smith, CFA (@crescatkevin) October 4, 2019
30-Year breakevens at new lows. The conversation is about growth now. Inflation still cycling lower. pic.twitter.com/Uq136qDTXU
— Eric Basmajian (@EPBResearch) October 6, 2019
If you somehow forgot the stock market turmoil of the last few months of 2018, the first few days of this quarter may have been a stomach-churning reminder.
But there are some fundamental differences now compared to then, analysts say, and while it doesn’t necessarily guarantee smooth sailing, it’s also possible we’ll avoid the worst of last year’s market carnage.
As a refresher: the Dow Jones Industrial Average DJIA, -0.36% opened on October 1, 2018 at 26,598. Three months later, shell-shocked traders were rummaging for dusty “Dow 24,000” sunglasses, with the index down 12%.
Put another way, as of Tuesday this week, all three U.S. stock indexes were up handily since the start of the calendar year, but over the past 12 months, with the dismal showing from last year’s fourth quarter baked in, they were negative.
Low continued: “The Fed missed their September opportunity, but it is not necessarily too late to act forcefully in October. Keep kicking the can with timid policy responses for too long, however, and there will be a recession.”
T. Rowe’s Dillon splits the difference. He thinks earnings growth may be about 4%, but isn’t sure how markets will respond to results like that, especially in the face of “geopolitical unknowns and atrophying data.”
That sets up “an uncertain intersection” between central bank support and “deteriorating economic fundamentals,” that will result in “choppy” markets, Dillon said.
In the week ahead, investors may get some early clues on the U.S. – China trade dispute also, as high-level talks resume Thursday in Washington. On tap next week too: data on September consumer price inflation.