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A Bird's Eye View Blog

Fireside Charts: A Mixed Bag of Economic News for the U.S., Soaring Iron Ore Prices in China, Addressing the Bond Market

By:BCM Investment Team | Date:Jul17, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

The U.S.’s current economic expansion is now the longest on record, but its rate of growth has been the slowest. Federal Reserve Chairman Jerome Powell has reiterated the Fed’s commitment to sustaining the expansion, but the Fed’s expectations do not seem to align with current futures market activity. Sentiment may be colored by reports of the country again approaching its debt ceiling, with an early September deadline to raise or suspend looming. Nonetheless, we are encouraged by news of the New York Manufacturing Index continuing its upward trend and achieving its largest gain in over two years. Chinese iron ore futures continue to rise following a fall in late June, both a promising sign for large exporters like Australia and a blow to steelmakers, who are urging the Chinese government to intervene. The Mexican bond markets have priced in six 25 bps rate cuts, while Dallas Fed President Robert Kaplan indicates an openness to cutting U.S. rates due to dropping yields, reflected by elevated dealer inventories. Finally, how long can the U.S. dollar maintain its status as the global reserve currency? With continued political and market uncertainty, it’s worth remembering that the world has cycled through many reserve currencies and our continued status is not guaranteed.

 

 

1. A nice print from the NY Fed; now lets see where the trend emerges...

 

Source: WSJ Daily Shot, as of 7/16/19

 

 

2. What the Fed has indicated through its dot-plots is higher than the market's expectations via the futures market.

 

 Source: Lazard Asset Management, as of 7/17/19

 

 

3. A great chart showing the annualized growth rates of U.S. economic expansions. The current expansion is now the longest ever, but the pace of growth is the least.

 

Source: Oxford Economics/Haver Analytics, as of 7/16/19

 

 

4. Here we go again...

 

Source: Oxford Economics, as of 7/17/19

 

 

5. A fun history lesson...

 

 Source: WSJ Daily Shot, as of 7/16/19

 

 

 

6. Demand for iron ore in China hit a record closing price, it is also helping the Baltic Dry index climb higher. A good sign for countries like Australia, a main iron ore supplier?

 

Source: WSJ Daily Shot, as of 7/16/19

 

 

7. Perhaps one of the reasons the recent 30 year Treasury auction had a low bid-to-cover ratio...

 

 Source: WSJ Daily Shot, as of 7/16/19

 

 

8. The bond markets in Mexico are pricing in six 25 bps cuts...

 

Source: Goldman Sachs Global Investment Research, as of 7/17/19

 

 

 

Yesterday President Trump reiterated his ability to levy new tariffs on Chinese imports, threatening the agreement with China’s Xi Jinping to restart trade talks that was announced during the G20. Do you have thoughts on the potential re-ignition of our trade war with China? Let us know below.

 

Tell Us Your Thoughts on the Latest Trade War News

 

 

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.