Employment indices are softening in Europe as it ventures deeper into manufacturing contraction, helmed by Germany which saw its manufacturing PMI decline at it’s fastest pace in a decade (re: since the recession era). We’ve already seen the yield curve invert; is this another signal of impending recession? Stateside manufacturing, however, ticked up slightly this month, beating expectations at a print of 51.0, hitting a five-month high, and managing to cling to growth. Could the Fed’s July “mid-cycle adjustment” be to thank? We can see below the effect of government stimulus on the S&P 500 and LEIs… but this pattern can’t be sustainable, can it?
1. After an inverted yield curve, the best predictor of a pending recession is rising unemployment. This new trend does not bode well…
Source: Nordea & Macrobond, as of 9/24/19
2. The good news and the bad news…
Source: WSJ Daily Shot, as of 9/24/19
3. So what happens if the stimulus stops or is not enough? We live in a cyclical economic system and messing with it may not end so well…
Source: Bloomberg & Stifel, as of 9/24/19
4. As a reminder, the trade war started around May of 2018.
Source: Bloomberg, as of 9/23/19
5. The U.S. manufacturing sector is fighting hard to stay in growth mode.
Source: WSJ Daily Shot, as of 9/24/19
6. The global trend for manufacturing is still down. Germany is a casualty of the trade war… the world’s 4th largest economy having to contend with #1 and 2…
Source: WSJ Daily Shot, as of 9/24/19
7. Here is Europe as a whole; readings below 50 indicate contraction…
Source: WSJ Daily Shot, as of 9/24/19
8. Japan remains in a manufacturing contraction…
Source: WSJ Daily Shot, as of 9/24/19
9. The GDP growth rate of emerging markets is still double that of the developed international markets
Source: Capital Economics, as of 9/24/19
10. There is a limit to what people will pay for a phone!
Source: Statista, as of 9/24/19