On this week’s Inside the Economy, we discuss the recent ISM (Institute of Supply Management) numbers. The numbers indicate slowing in the U.S. manufacturing sector. Is the rest of the U.S. economy starting to contract as well? What affect does all of this have on worker’s wages? We are now starting to see how tariffs are beginning to impact the U.S. consumer. Will the tariffs have an effect on inflation too? Tune in to find out the answers to these questions and more!
The summer months are a historically dull time in the stock markets. This is a time when many of the powerful fund managers and traders take their vacations and there isn’t a whole lot of activity going on. The summer of 2019 has been different, however, as there have been a multitude of headlines that have moved the markets in both directions.
The topic that has ruled the headlines this summer has been the continuing trade talks with China. All year long there has been constant back and forth between President Trump and President Xi threatening each other’s economies with tariffs. This uncertainty is putting a strain on the global supply chain, causing stock market investors to be weary. The U.S. and China are still in discussions on what a trade deal could look like, but until that comes to fruition expect more ups and downs in global stock markets.
International stocks saw a nice rebound the first 5 months of the year, as the EAFE index (tracks large company stocks in Europe, Australia, Asia, and the Far East) was closely tracking the performance of U.S. markets. There has been a divergence over the past 3 months, however, mainly due to the bleak economic data coming out of the European Union. Europe may already be in a minor recession.
All the chatter surrounding tariffs and a global economic slowdown has seen investors flee for safety this past summer. When investors get spooked by the stock markets, they put their money in long-dated bonds. This demand for longer maturity bonds drives bond prices up, thus lowering the yield. When shorter term bonds are yielding more than longer term bonds, it’s called a yield curve inversion. This inversion has historically been a recessionary signal.
