Displaying items by tag: expansion

(New York)

If your natural instinct is to worry about a looming recession, you are not alone. Logic dictates that with the economy and bull market having been rolling for so long, a downturn is inevitably around the corner. However, the chief economist at Deutsche Bank is making the exact opposite argument. Torsten Slok contends that the economic expansion will likely go on for “many more years”. His explanation: “The lack of willingness to spend on consumer durables and corporate capex is also the reason why this expansion has been so weak … And it is also the reason why this expansion could continue for many more years; we are simply less vulnerable to shocks in 2020 because there are few imbalances in the economy”.

FINSUM: We don’t dislike this view, but in our opinion the artificially low interest rates maintained by the Fed have much more to do with the length of this recovery (and its future prospects), than financial conservatism amongst businesses and consumers.

(New York)

The economy has been in a rough patch for about a year, with major economies and emerging markets all slowing. But things may be poised to turn around. Markets have gotten very excited about the prospect for an upturn after the IMF said it expects 2020 to be better than 2019. One economist from Macquarie summarized sentiment this way, saying “As 2019 draws to a close, the market is pricing in economic recovery, with equities in the US hitting new highs and long yields well off the recent lows”. Global trade is now stabilizing, which begs the question as to whether the economy has already weathered the worst of the storm.

FINSUM: When it comes to the economy, things are very hard to forecast, but on balance the situation is looking better than worse.

(New York)

New economic data was released on the US economy and fourth quarter growth was a mixed bag. The economy expanded at 2.6% annualized in the fourth quarter, a decent number that exceeded estimates, but did nothing to change the overall downward direction of the economy. Consumer spending slowed in the quarter. The economy expanded at 4.2% in Q2 2018, 3.4% in Q3 2018, and 2.6% in Q4 2018.

FINSUM: The trend downward is clear on many levels. That said, this should have been expected as the benefits from the tax cuts continue to fade. We think the economy is in the late stages of its expansion, but so long as the Fed stays quiet, we could drift on solidly for a while.