All Posts Tagged: investments

Bulls Get Corralled As Coronavirus Hits Global Economy

Scott Anderson
Chief Economist

A brief period of global economic and financial market optimism over the past four months is quickly going dormant as the global economic impact of the novel Coronavirus (COVID-19) comes into greater focus.

There was a brief “Goldilocks” period of improved global purchasing managers’ indexes late last year into January due to global central bank easing in 2019, an easing of global trade tensions with the signing of the U.S.–China Phase 1 trade agreement, and the U.K. election creating a way forward for Brexit after two years of heightened economic uncertainty.

Investors became convinced a global economic bottom was forming. That global economic rebound forecast by the IMF and others may yet prove to be a mirage.

The Coronavirus is rapidly slowing the momentum of the global economy and sucking the oxygen out of financial markets. While the Conference Board’s Leading Economic Index jumped 0.8% in January, the rebound could prove short-lived as the global growth slowdown accelerates and gradually saps the U.S. labor market and consumer spending of its relative strength.

In recent days, we have received some sobering news on the health of the global economy in the fourth quarter, even before the negative economic impacts of the Coronavirus began to be felt.

Japan, the third largest economy in the world, released fourth quarter GDP and it was shockingly bad, down 6.3% on an annualized basis in the wake of the typhoon and increase in Japan’s consumption tax.

Early reports suggest that Japan’s supply chains and tourism and travel industry are being significantly impacted in the first quarter nearly ensuring that Japan’s economic contraction is extended into the first quarter of 2020.

China’s growth rebound is not expected to be realized in 2020. China will likely see outright declines in its GDP growth on an annualized basis in the first quarter, which will do significant damage to China’s ability to achieve its 6.0% growth target this year. China is still probably operating at around 50-60% of capacity and auto sales and travel in China are down about 90% or more from a year ago.

The impacts are just now starting to be felt on global supply chains beyond China’s borders and we think U.S. companies could see more negative fallout in the second quarter than they acknowledge in the first.  So the premise that it will be a one quarter shock and done is looking less and less likely.

Eurozone growth also downshifted in the fourth quarter with outright real GDP declines for France, Italy, and no growth in Germany. Eurozone retail sales and industrial production both contracted more than the consensus forecast in December.

The preliminary U.S. Markit PMIs for February highlight the challenges that may be ahead for the U.S. and global economy in the months ahead. The Markit manufacturing PMI for February is rapidly revisiting the lows seen last summer, but the biggest surprise was the sharp decline in the Markit service PMI to 49.4, well into contraction territory, for the first time since 2013.

Bottom-line, February’s shockingly bad U.S. Markit PMI data, if confirmed by additional economic indicators in the weeks ahead, are probably bad enough to force the Fed off of the monetary sidelines and into an additional rate cut before the elections.

Our baseline forecast is that the U.S. and global economic slowdown remains in place and the U.S. and global economic risks to that forecast remain firmly on the downside. A cautious investment stance is warranted given currently high valuations.

Check out this week’s U.S. Outlook.

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Investment Insights: A two-horse race

Wade Balliet
Posted by Wade Balliet
Investment Strategy

After almost crossing the finish line, trade negotiations between the U.S. and China reached another hurdle over the weekend as President Trump tweeted that the U.S. would raise the current tariff on $200 billion worth of Chinese goods from 10% to 25% by the end of the week.

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Top six ways entrepreneurs use credit

Kristin Nelson
Wealth Management Strategy

The world’s most successful entrepreneurs are betting on themselves. That’s one big takeaway from our recent survey of thousands of elite entrepreneurs (those with $10 million or more in investable assets) around the world and their attitudes toward credit.

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Investment Insights: Investors are on the fence

Wade Balliet
Posted by Wade Balliet
Investment Strategy

This weekly report presents insights from our Global Investment Management team. U.S. stock markets are continuing their upward surge on solid earnings numbers and positive comments from both President Trump and Chinese President Xi Jinping regarding U.S.-China trade talks, while the declaration of a U.S. state of emergency was met with a muted response by […]

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Oh, what a year it’s been: Excerpts from our 2018 year-end review

Wade Balliet
Posted by Wade Balliet
Investment Strategy

2018 was a difficult year for financial markets with most major asset classes ending the year in the red.

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