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

Pakistan Call for Peace with India

Since their last war in 1971, India and Pakistan have lived in peace. However, controversy started last month when 40 paramilitary police were killed in the Kashmir region of India. The attack was claimed by a Pakistan-based militant group. On Feb 26 India retaliated with a jet raid of a militant camp in Pakistan. The next day on Feb 27, Pakistan shot down an Indian aircraft and captured the pilot after he ejected from the plane. However, as a sign of peace, Pakistan released custody of the pilot.

This past Saturday, Pakistan held a parade to show off its military power. Pakistan's president, Arif Alvi commented on the purpose of the parade stating, "Today's parade is sending the message that we are a peaceful people but we will never be oblivious of our defense." President Alvi has also released multiple statements making it very clear that war is not sensible and this dispute should be settled through communication.

I agree with president Alvi in the sense that war would be an inappropriate outcome for this dispute. If these two nations went to war this would obviously have an impact on many economies around the world. Many countries would have to get involved especially with threats of nuclear warfare. Hopefully we have seen the end of these violent attacks and peace can quickly be restored to these neighboring nations.

Link: https://www.reuters.com/article/us-pakistan-republicday/pakistan-call-for-peace-with-india-as-it-shows-off-its-military-might-idUSKCN1R409T

Defying Allies, Italy Signs On to New Silk Road With China

Despite warnings from its European allies as well as America, Italy has signed a deal with China which progresses the development of China's New Silk Road. The New Silk Road is a massive worldwide infrastructure project that the Chinese are undertaking to transport Chinese goods and resources through Asia, Europe, and Africa. The deal outlined billions in euros worth of agreements between Italian and Chinese companies.

The Italian government welcomed President Xi Jinping to Rome as a close ally and said that the deal will "build a better relationship" between the two nations. Critics including the Trump administration warn against the growing Chinese influence. One key fear is that the use of Chinese 5G wireless networks developed by Huawei could lead to Beijing spying on communications. The Interior Minister himself of Italy was absent from the deal signing due to his reservations on the deal, but ultimately concluded that as long as it served Italian interests "he was satisfied."




https://www.nytimes.com/2019/03/23/world/europe/italy-china-xi-silk-road.html

Ohio Gas Tax

Over the past few weeks the State of Ohio has considered raising the tax on gas.  Originally proposed by Governor DeWine in late February to increase 18 cents per gallon in one year and then increase each year after that with inflation as a part of his transportation budget.  The proposed budget then went to the Ohio House of Representatives where the tax was lowered from an 18 cent per gallon increase to increase 7 cents per gallon this year and then 3.7 cents per gallon the year after and would not be indexed to inflation.  Then this past Friday the Ohio Senate passed a tax that only increases the gas tax by 6 cents per gallon.  The two chambers must now work out the differences between the two bills before the end of March.  This tax will now make the cost of gas higher and as such we may see that commuters seek other means of public transportation when possible.  So those going on long distance trips may not fill up as much and may choose to fly out of CMH, CVG, or Hopkins.  Those in urban areas may choose public transportation instead of driving.  We will see how this affects the transportation choices of Ohio Commuters.








https://www.cleveland.com/open/2019/03/ohio-senate-passes-6-cents-a-gallon-gas-tax-increase.html

Global growth rebound hopes hit by weak factory data

In this article trade tensions were targeted as affecting factory outputs from manufacturers in Europe, Japan, and the United States. March surveys showed that this “setback” is not beneficial to the overall slowdown of the global economy. In Europe, factory activity contracted at the fastest pace in six years throughout the 19-country euro zone, Japans’ manufacturing output declined the most in three years, and in the U.S., manufacturing was at its’ smallest since June 2017 along with the 10-year Treasury note yield in New York reducing to a 14-month low. On Friday, U.S. stocks, European shares, and the euro all fell as well.

Global trade tensions are being pointed to as the root cause of these events. The article also mentioned that the “spillovers” from events in Europe, the problems in Italy and with Brexit, create an “uncertainty” that needs to be considered if countries seek to end the slow global growth. China’s economic slowdown, another external factor, is a large cause of the global economic slowdown. It most notably affects Japan for they also are hit by the trade tensions between China and the U.S., due to many of their outputs being shipped to China who then sends them as finished goods to the U.S.

At the end of 2018, the euro zone was at its’ slowest economic growth pace in four years at 0.2 percent. The European Central Bank has decided to “offer banks a new round of cheap loans,” in the hopes that this will help the economy. Other solutions could come from the trade discussions next week between China and the United States. I am curious to see if the talks can really bring an end to the trade war that is contributing to the slowdown of global growth of many nations.

https://www.reuters.com/article/us-economy-global/global-growth-rebound-hopes-hit-by-weak-factory-data-idUSKCN1R32AX

UK Inflation Unexpectedly Accelerates For First Time In 6 Months

Throughout this article, the recent unexpected changes various UK inflation levels are summarized. More specifically, the CPI rose 1.9% year-on-year, after a rise of 1.8% from January of this year. Given that the inflation rate was expected to remain at its previous level, the article speculates that February's food, alcohol, and tobacco price hikes contributed to this unexpected increase. Core inflation rate was shown to slow to 1.8% from 1.9 the moth prior, which was also not anticipated. The article also mentions that the UK house price inflation decreased to 1.7%, making it the weakest rate since June 2013.

While this article does not explore possible causes and effects in detail, the unexpected nature of these statistics still fell within acceptable ranges. These general overall price level increases have unsurprisingly led to decreased sales of the affected products. Specifically regarding food, a no-deal Brexit’s possible effects on perishable goods will most likely include another price hike. It will certainly be interesting to see how these nations and their economies will continue to change within the next coming months, for a variety of reasons.

https://www.rttnews.com/story.aspx?Id=2987603

U.S. Treasury Yield Curve Inverts for the First Time Since 2007

On March 22, 2019, the US Treasury yield curve inverted for the first time since 2007. "The gap between the 3-month and 10-year yields vanished as a surge of buying pushed the latter to a 14-month low of 2.416 percent. Inversion is considered a reliable harbinger of a recession in the U.S., within roughly the next 18 months". The short-term interest rates exceeded the long-term interest rates on Friday. 

Historically, an inverted yield curve has been viewed as an indicator of a pending economic recession. When short-term interest rates exceed long-term rates, market sentiment suggests that the long-term outlook is poor and that the yields offered by long-term fixed income will continue to fall. Is this finally a trigger for a recession coming? Unemployment rates have been relatively low, high GDP, high earnings, etc. Are we on the cusp of the business cycle and looking to head downwards? How will this invert impact the economy?

https://www.bloomberg.com/news/articles/2019-03-22/u-s-treasury-yield-curve-inverts-for-first-time-since-2007?srnd=premium

The Fed's Rate Raising Days Are Over. Wall Street Couldn't Be Happier.

At the beginning of 2019, the Fed announced their plans to slow the economy using contractionary monetary policy. Their plan was to increase interest rates which concerned investors that the cost of borrowing might become too high, which would ultimately send the economy into another recession. In December, the odds of another interest rate increase was 30%. On Wednesday, the Fed unanimously voted to maintain its benchmark interest rate in a range of 2.25% to 2.5%. It is now more probable that we will be seeing a decrease in interest rates at some point during 2019. According to experts, there is actually a 29.3% chance that interest rates will fall. Earlier in the year, Jerome Powell announced that the Fed will be more patient in evaluating whether or not they will keep raising interest rates. It will be interesting to see the short-term effects that current interest rates will have on an economy that is expecting a slowdown.

https://www.nytimes.com/2019/03/20/business/stock-market-fed-interest-rates.html