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A Bird's Eye View Blog

Fireside Charts: “Puzzling” News for the U.S. Economy, Spreading Trade Tensions, and Rate Cuts – Oh My!

By:BCM Investment Team | Date:Jul19, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

CSX President and CEO James Foote calls Trump's economy "one of the most puzzling" he's seen in his 40 year career following the company's miss on Q2 earnings, leading to the company's largest drop in stock price since the financial crisis. The trade tensions indicated as a factor in CSX's performance are clearly top of mind at the Fed, where the count of "trade" and "uncertainty" related terms in the Beige Book Report—released Wednesday—have surged since 2018. Over in Japan, industrial momentum has slowed dramatically as they enter their own trade fight with South Korea, which DBS Group Research chief economist Taimur Baig, called “disturbing and unhelpful for the global economic sentiment,” and was perhaps the catalyst for South Korea's first interest rate cut in three years. These reports once again force us to question the worth of tariffs, especially as surging exports from China to Vietnam, and Vietnam to the U.S., indicate that some Chinese companies may be dodging them altogether via middlemen.

 

 

1. Will this be the first of many or more of an isolated event? Stay tuned!

 

 Source: Reuters, as of 7/18/19

 

 

2. Our concerns about the effects of a trade war now permeate the Fed's Beige Book report

 

Source: BofA Merrill Lynch Global Research, as of 7/19/19

 

 

3. Declining trade and growth is causing other central banks, in this case South Korea, to cut their interest rates.

 

 Source: WSJ Daily Shot, as of 7/18/19

 

 

4. While some manufacturing is leaving China for Vietnam, some clever companies are just using Vietnam as a "middleman" for trade between China and the U.S.

 

Source: BofA Merrill Lynch Global Research,, as of 7/18/19

 

 

5. One month does not make a trend, but this is a great print from the Philly Fed!

 

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

 

 

6. A new twist on the Eagles-Giants rivalry?

 

Source: Renaissance Macro Research, as of 7/19/19

 

 

7. Housing starts were a bit softer than expected

 

 Source: WSJ Daily Shot, as of 7/18/19

 

 

8. But permits, a rough indicator of future home building, missed big and is down 11% YOY

 

Source: WSJ Daily Shot, as of 7/18/19

 

 

9. The housing market in Canada shows quite a different picture...

 

Source: NBF Economics and Strategy, as of 7/18/19

 

 

10. Which countries own our debt/bonds?

 

Source: US Department of the Treasury via HowMuch.net, as of 7/19/19

 

 

11. For reference, the U.S. is around 105% debt-to-GDP. Much of this stimulus spending has been on infrastructure, paving the way for future growth.

 

Source: Credit Suisse, as of 7/19/19

 

 

12. This does not look like a healthy economy...

 

Source: Scotiabank Economics, as of 7/18/19

 

 

 

Expectations of a 50 basis point cut to short-term interest rates rose following comments made by New York Fed President John Williams that policymakers need to "act quickly" as economic growth slows. This lead to a rise in mortgage rates, despite the sluggish U.S. housing market. A spokeswoman for the New York Fed later insisted that the comments were not indicative of upcoming policy changes and originated from an “academic speech" that was "not about potential policy actions.” Do you expect this month's FOMC meeting to result in rate cuts?

 

Will the FOMC announce a rate cut this month? Tell us your bet.

 

 

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.