Hey economic news outlets, where is the recession? Stick with me for the next few minutes as I discuss economic news and the big question; where is the recession?
Conflicting Economic News Headlines
Alright, let’s start with economic news, and I’m just going to cover a few articles and some headlines that came out since early November. As I write this, it’s December 4, 2019, so we’re a few days into December. But check this out, on November 6, 2019, an article comes out that says, “US productivity drops by the most since the fourth quarter of 2015.” Then on November 11, 2019, “Weak 2019 earnings growth paves the way for a strong 2020 earnings picture.” And again, on November 11, 2019, “Wall Street may be growing too complacent on stocks as bets against volatility hit a record.”
Onto November 12, 2019, “The fear of missing out on the rally replaces the recession worry in the most widely watched investor poll.” And the same day, November 12, 2109, “More than half of the world’s richest investors see a big drop in 2020 says UBS survey.” Then on November 19, 2019, it says, “US housing starts rebound; permits at the highest level in over 12 years.” November 21, 2019, “All-Star investor Richard Bernstein warns of a ‘full-blown profit recession that could surpass Wall Street in 2020.” Now to November 22, 2019, “US consumer sentiment comes in higher than expected for November.”
Economic News Overload
Are you starting to see a little pattern here? The problem is there is no pattern. These are headlines. This is news and conflicting reports coming at you every single day and coming at me every single day.
Let’s continue, November 26, 2019, “Dallas Fed President Robert Kaplan says the fourth-quarter economy is ‘weak’” Now November 26, 2019, “Fed’s Brainard argues for capping interest rates during the next downturn.” November 27, 2019, get this “US economy grew at a moderate rate of 2.1%.” And the third quarter that was above the 1.8% estimate. November 27, 2019, “US durable goods orders rebound in October, rising 6%.” Surprise, surprise. And lastly, December 4, 2019, “Next year will be hard on the housing market, especially in big cities.”
Wait a minute, wasn’t there just one that said the housing starts are at the highest level in 12 years, and housing starts are rebounding and building permits are at the highest level over 12 years. That economic news out there today – you have to dig deeper than the headlines. You have to look past what I’d call clickbait.
They want you to click on these economic news articles, they want you to read this stuff. They want your emotion to get charged up when you start looking at it. But look, let me tell you something. There’s a lot of things that you can do in your life to get your emotions charged up; you can watch a great movie or you can spend time with kids and grandkids. This is noise.
November Market Performance and China Trade
Yes, the markets had a fabulous month in the month of November. And then all of a sudden, Trump tweets something or says something that the markets don’t like about trade with China. Now, all of a sudden, there are three days straight with market losses. Not all of the gains that we saw in November were lost, but pretty close to it.
Figure 1 – Chaikin Analytics
Check this out. Let’s look over the last month in the markets back from November 4, 2019, to today. From November 4, 2019, all the way up through the end of November, markets were up almost 3% on just about every single index that you can look at. However, on December 1, 2019, to today, over those three days, we see the market go back down.
The markets are always going to be volatile. What’s happening today is what we’ve been talking about for the last few months. Fundamentals are not driving the market right now; the news is driving the market. But there are some good fundamentals in place. And it appears that if we can get a trade deal done with China, that that should alleviate some of the concerns running into 2020.
I want you to be on the lookout for an article that we have out there right now. It’s called Stock Market News Versus Fundamentals, where we dive into detail about what’s happening with the news versus the fundamentals and how the markets react.
More on China Trade, The Real Story
Let me quote an article to you about what’s going on over in China. This article, The China Trade War, came out from a company called ITR Economics; they’re fabulous as far as looking at economic predictions. The reason I wanted to bring this to you is because nobody is talking about how this trade war or I’ll call them “trade negotiations” are impacting China.
“There is pain in the industrial sector of China’s economy. Industrial Production in China has slowed to 5.6% on a 12-month year-over-year basis (12/12), the slowest rate of growth in over 22 years.”
The article continues, “Automobile Production for the last 12 months came in 13.9% below last year at this time, with August posting a tentative rise off a July record low. Automobile Production for the last 12 months came in 13.9% below last year at this time, with August posting a tentative rise off a July record low.”
The Chinese know this. This needs to be all over the headlines. This is why Trump is doing what he’s doing. And I will tell you that my belief is we’re going to get a trade deal done with China because the pain that’s going on in the Chinese economy is far greater than anything we see here.
Looking Forward to a Deal
Now, with that, let’s hope that we get phase one done here in December. If we don’t get phase one done in December, I think we’re going to have a lot of volatility in the markets again in December. Sad to say, but I believe that the longer-term outlook here I see over the next six to 12 months is optimistic. Also, look out for an article we’re going to write on markets during an election year.
With that, I want to wish every single one of you a fabulous holiday season. I hope you each have a great time with the families. And remember when it comes to your money, we’ve got to make sure the way your money is invested fits within your overall plan. We’re here to talk to you. We’re here to help you. And we’re here to answer any questions that you have. Thanks for joining me today, and as always, schedule a complimentary consultation below or give us a call at 913-393-1000 if you’d like to have a conversation.
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