Weekly Economic Report
In this yearend missive we peer into 2019 with increased conviction there will be a slowdown in real economic growth to under 1% (perhaps under 0.5%) for at least a couple of quarters – but probably not a recession -- following the steep correction in equities. The S&P500 is currently down 18% from its all-time high on September 21st. On September 17th , President Trump escalated the trade war with new 10% tariffs on $200 billion in Chinese goods (and they responded with 25% tariffs on $60 billion in US exports). More importantly, that announcement included a promise to raise tariffs to 25% at yearend. On September 26th, the Federal Reserve raised rates 25 basis points with a hawkish statement that led investors to add another half a tightening in 2019. It has only gotten worse on both fronts since then. Unfortunately, we see no quick fix to either a tighter Fed or a looming trade war, with the resolution of both issues currently pushed off until at least March of next year – and we have low expectations either will be fully resolved. Bottom line, it may well take an economic slowdown to focus the minds of the key decision makers involved.