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A Bird's Eye View Blog

Fireside Charts: ECB Makes a Surprise Move, Shanghai Stock Slump and World Trade Trouble

by : BCM Investment Team | POSTED: Mar08, 2019 | CATEGORY: Fireside Charts, Equity, Economics, Market Highlights

For the 19 countries that use the euro, the European Central Bank (ECB) pushed back the earliest date for an increase in interest rates from current record lows to year end. Then they downgraded their forecasts for the Eurozone's GDP growth and CPI causing a dramatic decline in the Euro and European bonds. Here at home, model forecasts for the current quarter's GDP growth are increasingly pessimistic as the household net worth fell sharply in 4Q18. How will this affect consumer spending and in turn the economy given that the U.S. consumer is responsible for the majority of both domestic and global GDP.

 

1. Just how bad is Europe's economy? Yesterday the ECB announced a new form of QE with low cost, targeted loans and they downgraded their GDP forecast yet again...

 

 

Source: Picket Wealth Management, as of 3/8/19

 

  

2. Both the Euro and European bonds fell sharply in response. Many shorter term yields in Northern Europe are turning negative again.

 

 

Source: WSJ Daily Shot, as of 3/7/19

 

 

3. Wow... the U.S. consumer contributes more to global GDP than all of China? 

 

 3.8 chart 4

Source: Deutsche Bank; as of 3/5/19

 

 

4. Of course this becomes an exercise in who is counting what...

  
3.8 chart 5

Source: Natixis, as of 3/6/19

 

  

5. With the Atlanta FED's model showing GDP at about 0.25% for 1Q19, the NY FED is close behind. Will the actual print surprise to the downside or will the FED models be proven wrong?

 

 3.6 chart 1

Source: WSJ Daily Shot, as of 3/5/19

 

  

6. U.S. household net worth declined sharply in 4Q18 as the markets pulled back.  Will U.S. consumer spending follow?   ~70% of the U.S. economy is the U.S. consumer...

 

Source: WSJ Daily Shot, as of 3/8/19

 

 

 

7. With the exception of 2018 due to the tax package, analysts always seem to start high and revise earnings down throughout the year...

  

3.8 chart 7-1

 Source: Yardeni Research, as of 3/7/19

  

 

8. While the Chinese 2019 YTD stock market performance has been impressive and it is positioned for a reversion to the mean.

 

3.8 china

Source: WSJ Daily Shot, as of 3/6/19

 

      

9. Another huge economic miss from China. The U.S. Ambassador to China stated yesterday that there is no imminent trade deal...

3.8 chart 14

Source: MSCI; 3/8/19

 

 

10. An update to tariffs and trade...

 

3.8 chart 3

Source: WSJ Daily Shot; as of 3/5/19

 

 

 

11. One would have to say we are losing the trade war...

 

3.8 chart 9 

Source: Oxford Economics, as of 3/7/19

 

      

12. Despite all the talk about a trade deal with China, the U.S. farmer is still paying a heavy price...

 

 3.8 chart 6

Source: Bloomberg, as of 3/6/19

 

 

13. Is this how the new trade agreement is going to treat Canada?

 

3.8 chart 8

Source: WSJ Daily Shot, as of 3/4/19

 

 

14. This is extraordinary...

Source: Bloomberg; 3/7/19

 

 

15. Some see bonds with low rates...we see ~$525 billion of bonds that are variable rate and subject to rate increases.

 

 3.8 chart 2

 Source: Dealogic; as of 3/5/19

 

 

Last year, the Bloomberg Barclays Aggregate Bond Index (BBAB) eked out a 0.01% return and thus preserved a rather remarkable streak of only having one negative year since 1999. Ask yourself: what’s new in the evolving construct of the BBAB index? Do you know the current risks in the corporate bond landscape? Test your skills in our two-part bond series now.

 

Changes to the Aggregate Bond Index   that Advisors Should Know About

 

 

Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.