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A Bird's Eye View Blog

Fireside Charts: U.S. GDP, Trade Talks, and the "Fight for $15"

By:BCM Investment Team | Date:Jul29, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

While many were relieved to see U.S. GDP beat expectations last week at 2.1%, is our economy is too reliant on major cities if our 25 largest cities carry 51.8% of GDP, versus non-metro areas accounting for only 9.9%? Another hot topic of debate between rural and metro areas—the "fight for $15"—heats up this week on the back of the House passing a bill to reach a $15/hour federal minimum wage by 2025. 21 states follow the federal minimum of $7.25/hour, but how many families can survive on an annualized ~$14,500 (gross) per year—especially when a "modest one bedroom apartment" requires an hourly rate of $18.25? Lastly, we're again reminded why state-owned enterprises should generally be avoided as we see that without subsidies, their returns are generally 35-40% lower.

 

 

1. U.S. GDP had a mild positive surprise led by the consumer and government spending.

 

 Source: WSJ Daily Shot, as of 7/29/19

 

 

2. How concentrated is our economy?

 

Source: Bureau of Economic Analysis, as of 7/29/19

 

 

3. Regional banks will have to break out one way or another...

 

Source: WSJ Daily Shot, as of 7/29/19

 

 

4. 40 hours times 50 weeks (assuming 2 weeks of unpaid time off) is 2,000 hours. At the Federal level of $7.25/hour, this totals $14,500/ year. Could you survive on this, let alone raise a family?

 

Source: Labor Department, as of 7/29/19

 

 

5. Meanwhile, it takes an hourly pay of $18.65 to afford a "modest one bedroom apartment."

 

Source: Statista, as of 6/27/19

 

 

6. Are the bond markets priced to perfection?

 

Source: BCA Research, as of 7/29/19

 

 

7. Why State-owned entities should generally be avoided...

 

Source: Gavekal, as of 7/29/19

 

 

Trade talks with China are scheduled to resume Tuesday as senior U.S. officials travel to China for the first face-to-face meetings since the G-20 ceasefire in June. While China has recently indicated interest in renewing purchases of U.S. agricultural products—and followed through by importing over a million tonnes of U.S. soybeans—White House economic adviser Larry Kudlow tempered expectations on Friday by saying that he "wouldn't expect any grand deal" to result from the meeting. With the 2020 election fast approaching, there's pressure on the U.S. to make a deal before China determines they're better off waiting to negotiate until a winner is announced. Curious to read more about our thoughts on the trade war? Click below to read our Mid-Year Review, "Odd, Odds and Tods."

 

 

BCM's 2019 Mid-Year Review: Odd, Odds and Tods

 

 

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.