China pledges to expand financial market opening as U.S trade delegation arrives

The trade war between the US and China has been a major headline the past several months as the United States placed heavy tariffs on hundreds of billions of dollars’ worth of Chinese imports last year to force change within the Chinese economy. In response, Beijing retaliated with tariffs on U.S goods. Recently, China has pledged to sharply expand market access for foreign banks and securities and insurance companies, especially in its financial services sector. Chinese Premier Li Keqiang also mentioned that the Chinese governments will also work on more favorable policies for foreign investors to trade Chinese bonds. Increased access to financial services markets was one of the U.S demands for change from Beijing on trade policies. As U.S officials arrive in Beijing for trade talks, an offer from China to allow U.S cloud computing companies access to China’s fast-growing market thought special Chinese free trade zones. According to sources, the two countries have made progress in all areas under discussion. As progress is made, the U.S may drop some tariffs if a trade deal is met, however they are not going to give up any leverage. Li mentioned the possibility of fluctuations in the Chinese economy but is confident that early policy steps were gaining traction. Chinas economic growth cooled to 6.6% last year, which is the slowest pace in nearly 30 years. If a trade deal is made, it will be interesting to look at the impact is has on the global economy as well as individual sectors.

https://www.reuters.com/article/us-china-boao/china-pledges-to-expand-financial-market-opening-as-u-s-trade-delegation-arrives-idUSKCN1R9076

US Consumer Confidence weakens in March

This article continuously references the volatile stock market and how that has effected overall consumer confidence. The index fell from 131.4 to 124.1 in February.

The main point in this article is that the volatility of the stock market has basically been matched by the consumer confidence index over recent months. With the huge stock market drop in December of 2018 we saw one of the first drops in consumer confidence in Trumps administration. In the times we are in now, aka good economic conditions, full employment, and growing markets, any hiccup in the system can raise large concerns. Another reason, is because the US economy has been prospering for many years now, so again that hiccup can really make people think if a slowdown is among us.

Going forward, any future stock market correction should lead to even more doubt. Although, when times are good no one wants to be the one to think the market is going to fall soon. As basically all of our recessions have shown.

From my feeble point of view, we do not have a systemic issue like CDO/MBS of 2008 which would only magnify a recession. If the market truly is over valued and we need to slow down a bit for future growth, then so be it, lets just hope the FED and administration prepare for it.



https://www.cnbc.com/2019/03/26/us-consumer-confidence-weakens-in-march.html

Stocks Fall as Bond Market Flashes a Recession Warning

On Friday March 23rd the treasury bond yield curve inverted signaling fear across the bond market.  This comes after the FED's rate change decision two days prior to halt rate hikes.  An inversion occurs when yield from long term bonds is smaller than short term ones.  While the article points out that there are several ways to represent and measure the yield curve and not all have inverted, like the two and 10 year treasury notes.  While a inverted yield curve has preceded every large economic downturn there is not a causal relation.  Several times the yield curve has inverted without a recession following within the next year.  However the inversion on Friday resulted in a fears of a coming recession and composite indexes, The S&P fell 190 basis points while the Nasdaq fell 250.



https://www.nytimes.com/2019/03/22/business/yield-curve-inverted-recession.html

Boeing's 737 Max and the US GDP

Since two of their 737 Max planes have crashed in the last six months, deliveries from aircraft giant Boeing have come to a stop while an investigation happens. However, this hasn't stopped them from producing the planes themselves as they continue to be completed and kept in an inventory for when the investigation is over and they hopefully will be able to re-release the planes. However, concerns that the US GDP could fall by more than half a percent have risen as people are starting to worry that Boeing may ultimately have to shut down production as this investigation drags out. As the Boeing 747 Max model accounted for almost one-quarter of total aircraft production in the country, it's still somewhat surprising to see the projected impact that just one company can have on the US economy. But, as it has been mentioned, they are still continuing to produce and store the planes so GDP should remain unaffected by them unless they are ultimately told or come to the decision to stop making the aircraft for whatever reason.

It should be noted that a halt in production isn't totally out of the picture. Shares of Boeing have fallen almost 11 percent as of Thursday, March 21st. The company also has coordinated to slow down production of the plane and focus on older incomplete work in the coming weeks to try and use their resources efficiently somewhere else during this time.

SOURCE: https://www.cnbc.com/2019/03/21/boeings-737-max-could-hit-us-gdp-if-production-is-halted-jp-morgan.html

Markets drop sharply as fears of global slowdown intensify

Thanks in part to fears over Brexit but more so "faltering demand for exports amid the US-China trade dispute," eurozone factory productivity has fallen more quickly than ever in the last six years and the world is seeing a sharp drop in financial markets. The expectations of a surge of growth following the somewhat less-than-spectacular end to 2018 seem to be less realistic now than they were before, according to the Guardian. The Dow Jones Industrial closed on Friday down 1.8% and the FTSE 100 down 2.0%. Across the rest of Europe, markets did not fare well - Germany's manufacturing output recorded the steepest decline in seven years. According to the article, this is due to China's slowing economy and President Trump's import tariffs on Chinese goods. China is, of course, Germany's biggest export market for car manufacturers. The final note of the article is that the PMI index showed Germany and France as the two worst performers at the moment, with the rest of the eurozone growing well enough.

Article:
https://www.theguardian.com/business/2019/mar/22/eurozone-suffers-sharp-decline-manufacturing-activity

Did the economy really grow 3%?

American spending on services slowed in the fourth quarter. This had effect on the downturn of Gross Domestic Product. The Bureau of Econonic Analysis said GDP grew by 2.6% in the fourth quarter but that was based on incomplete data. Following the data J.P. Morgan Lowered their fourth quarter results. Trumps administration cites they have lifted the US economy by their policies. BEA had 4Q-to4Q as 3.1% while private forecasters have it just below that mark.

https://www.google.com/amp/s/www.wsj.com/amp/articles/BL-REB-39342%3fresponsive=y

Japanese economy downgraded amid China slowdown

The government downgraded their assessment of the Japanese economy do to slower exports to China. This is the first time the economy's outlook has been downgraded since March of 2016. Consumption and capital expenditures make up 70% of GDP according to government officials. Their most recent growth phase, the Izanami Boom, may have been surpassed by the most recent boom from 2012 to now. A seven-member panel of private-sector and academics are responsible for determining the length of economic cycle, and their process takes longer than a year. They claim exports have had a "weak tone" but private consumption is increasing.

https://www.japantimes.co.jp/news/2019/03/20/business/economy-business/government-downgrades-view-japanese-economy-first-time-three-years-amid-china-slowdown/#.XJhJYChKg2w

The distribution of wealth in the United States and implications for a net worth tax

Wealth inequality in the United States is high and has increased sharply in recent decades. Taxes on wealth are a natural policy instrument to address wealth inequality and could raise substantial revenue while shoring up structural weaknesses in the current income tax system. A net worth tax is an annual tax imposed on an individual or family's wealth, or net worth. Wealth is distributed in a highly unequal fashion, with the wealthiest 1 percent of families in the United States holding about 40 percent of all wealth and the bottom 90 percent of families holding less than one-quarter of all wealth. The high level of wealth inequality in the United States also is reflected in the substantial difference between median wealth ($97,000) and mean wealth ($690,000). As a result, 84 percent of families have wealth below the mean. The highly skewed distribution of wealth is one of the primary reasons the burden of a net worth tax would be highly progressive. Net worth taxes typically apply only to the relatively wealthy or extremely wealthy and exempt the rest of the population. The patterns of wealth inequality among the entire population shown above are mirrored among the wealthy. Families with $1 million of wealth or more are older, more likely to be white, and more likely to have a 4-year college degree than the population as a whole. Low-wealth and high-wealth families differ in terms of the assets and liabilities they hold. Cars and other vehicles account for the overwhelming majority of wealth for low-wealth families. Middle-wealth families hold much more of their wealth in home equity, with more modest contributions from retirement accounts, bank accounts, and cars. Very high-wealth families hold much more of their wealth in business equity and financial assets outside retirement accounts.

https://equitablegrowth.org/the-distribution-of-wealth-in-the-united-states-and-implications-for-a-net-worth-tax/

Mueller Doesn't Find Trump Campaign Conspired With Russia

Special counsel Robert Mueller concluded that President Trump and his campaign did not conspire or coordinate with Russia to interfere in the 2016 election. Mueller did  not draw a conclusion on whether Trump obstructed justice as the final report neither finds that the president committed a crime nor exonerated him. Its going to be hard to find evidence that Trump actually obstructed justice.  This announcement brings an end to the investigation that lasted almost two years. The special counsel said that, "members of the Trump campaign conspired or coordinated with the Russia government in its election interference activities. This report removes a legal threat and presents a political win for Trump and his allies.

To me this is kind of ridiculous. No matter how strongly anyone feels about Trump as a person or about his policies, it is crazy that the opposing side will do anything to slander or demean this man in any way. People may believe in what Trump stands for or absolutely hate him, but I find it very interesting that people try and undermine him in every aspect. He is the president of the United States which is the pinnacle of political power. People try to chop him down and make up stories about him which brings focus to all of his negative qualities. The president has always been a highly scrutinized position no matter who is in office but I doubt there has been a more focused and tactical effort by those in opposition of him to slander the reputation of the president.

https://www.wsj.com/articles/top-findings-from-muellers-report-to-be-sent-to-congress-within-the-hour-11553454918

Ford is cutting 5,000 jobs in Germany with more cuts coming for the UK

Ford in an effort to reduce costs in Europe is cutting 5,000 jobs in Germany and more in the UK. The company offered voluntary separation packages for the employees in Germany and the UK to help improve their performance in the region. Ford is trying to reshape its business in Europe to focus on commercial vehicles, passenger vehicles, and imports. They are trying to focus on the most profitable vehicles, and is even trying to partner with Volkswagen to increase the market around the world.

I think it would be interesting to see how partnering with Volkswagen would work, for both companies may have different ideas on how to increase the markets around the world leading to many conflicting ideas. It would also be interesting to see how the Germany and UK workers would react to the high amount of people being cut. 

Source: https://www.cnbc.com/2019/03/15/ford-is-cutting-5000-jobs-in-germany-with-more-cuts-coming-for-the-uk.html