Newell Palmer: Monthly Economic Notes – June 2019
Trade wars, whether between US and China or US and Mexico, can be unsettling to markets. However, taking a step back, the fundamentals are still positive with good economic growth in the US and China, and low unemployment in the US. The current economic expansion is the longest since the second world war, but economic cycles do not end because of old age. The two factors to watch that may indicate an end of the economic cycle are a period of synchronised monetary tightening and a major misallocation of capital, but these signals are not flashing amber. Previous cycles ended in 2008 and 2000 with a synchronous tightening of monetary policy by major central banks. At this time, there is no synchronous monetary tightening and some central banks are either loosening policy or indicating that they may loosen policy. Whilst there is increasing leverage in the US corporate sector and Chinese State-Owned Enterprises, these levels are not as high as previous cycles.
Newell Palmer: Monthly Economic Notes – May 2019
A slowing, but still growing world economy and patient central bankers are supportive of growth assets. A reduction in geopolitical risk has also served to boost market sentiment. The rally in growth assets in the first four months of this year was a snapback from fears in late 2018 of an imminent economic slowdown and hawkish US Fed rhetoric. Since then the US Fed has made a dovish pivot and markets have rallied. However, the path forward from here for markets has various risks that can bring the market lower. These risks include the path of global growth and geopolitical risks.
Newell Palmer: Monthly Economic Notes – April 2019
There are many ways to define an inverted yield curve, but one measure inverted in late March 2019, when you can earn more by buying a 3-month US Treasury note than a 10-year one. This economic gauge has recently received wide attention because an inverted yield curve has occurred prior to each of the last five US recessions. The last time the curve inverted was in early 2006 in the lead-up to the onset of recession late the next year.