Displaying items by tag: US

(Washington)

The US and China ended two days of trade war negotiations yesterday, and apparently there was little progress. Both sides pressed ahead with enforcing $16 bn of further tariffs on one another. The deputy White House Press Secretary commented at the end of the negotiations that the two countries “exchanged views on how to achieve fairness, balance and reciprocity in the economic relationship”, but made no mention of any material progress being made. One senior Trump administration official added “in order to get a positive result out of these engagements, it’s really critical that they address the fundamental concerns that we have raised. We haven’t seen that yet”.

FINSUM: While the market seemed very hopeful about these talks, the trade battle with China looks likely to keep going for a while yet as the issue seems to be quite intractable.

(New York)

The US real estate market has appeared to be on the ropes for several months. While the woes in commercial real estate have been apparent for some time, it is the recent reversal in the residential market that caught some off guard. Well, new data is out, and it seems to have cemented a new reality—housing is in full decline. Homes sales declined month over month, with a big drop in sales in the northeast. The home sales figure was the weakest in two years. The chief economist of the National Association of Realtors commented that “Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come on to the market”.

FINSUM: The summer is usually a better time for home sales, so this comes during what should be a period of strength. Home prices seem bound for a correction given how pricey things have become at the same time as rates have been rising.

(New York)

Pimco just made the most obvious warning we have ever heard, but within it, there are some useful reminders. They warned investors that there is a 70% likelihood of a global recession within the next five years. Their reasons for thinking so, and how to handle it, are a bit different than the norm however. Their focus is on how all central banks are in tightening mode and public market assets have become very expensive. Pimco says investors can find safe haven in private markets as the recession takes hold. These include in private credit, such as in corporate loans, non-qualified US mortgages, and commercial development loans. They say returns in those areas will be 10%+ instead of 5-6%.

FINSUM: We think their drivers are correct but their timing is off. We see a recession coming much sooner, probably within two years (at least for the US). However, the private credit recommendation is a unique one, but also hard for most investors to access.

(New York)

Citigroup says that the US just crossed a scary economic threshold. The bank’s well-known economic surprise index shows that the US is now at greater risk of negative economic surprises than is Europe, the first time that has occurred in some time. While the economy has been doing well, the trade war and a multitude of other factors, including the Fed, mean the US is more at risk of an economic downturn than Europe.

FINSUM: It is pretty easy to say that a country whose growth is at 4.1% is at risk of a downturn. It would not take much for the US to slow down considering its growth appears to be peaking.

(New York)

The US real estate market is in a worrying period. New builds, home sales, and inventory have all been showing weak signs for the last few months, and it seems to portend the start of a reversal in the market after a long run higher. This week will see if the current downward trend holds, or whether the data was an aberration. New data this week will cover new and existing home sales, which the market will be watching closely for signs of a downturn.

FINSUM: Housing and building-related stocks have suffered this year on a worsening outlook. Our instinct is that housing has a hit a wall and may be at the start of a correction.