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Fireside Charts: U.S. In For Weak GDP Growth Rate if PMI Remains at Current Levels, And China Faces Mounting Debt

By:BCM Investment Team | Date:Sep06, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

While we're pouring over today's jobs report, cap off your Friday with a look at this week's economic trends. The trade war and a decline in exports has led to U.S. businesses suffering "one of the toughest months since the global financial crisis" in August, says Chris Williamson, Chief Economist at IHS Markit. US PMI recorded weak expansion in August, and if it remains at its current levels, we'll be on track for an anemic 1% annualized GDP growth rate. While yields on the two-year Treasury surged yesterday, the 30-year Treasury has our attention as its August return was the third strongest since 1988. With so much demand flowing into the long-duration market this summer, are you surprised yields weren't weaker? And while the trade war is driving U.S. importers to look outside of China, Chinese businesses face another burden as a wave of repayment obligations approach in 2020. Could this give the U.S. a leg up in trade war negotiations when talks resume later this month?

1. Does this remind anyone of the late 1990's?


Source: WSJ Daily Shot, as of 9/5/19



2. Will this trend hurt companies with long-term capital needs?


Source: Deutsche Bank Research, as of 9/6/19



3. Are long-duration bonds due for a pullback?


Source: Refinitiv, as of 9/6/19



4. Despite our yields plummeting across the yield curve, we still have the highest rates amongst the developed world...


Source: WSJ Daily Shot, as of 9/4/19



5. Occasionally, it is worth reading a bit. This PMI is both for services and manufacturing...


Source: IHS Markit, as of 9/6/19



6. We have been getting a few questions about the recent volatility in the markets. Here are a few examples of one of the major causes:


 Source: Bloomberg, as of 9/6/19



7. This may be why the Chinese are coming back to the negotiating table:


Source: Pictet Wealth Management, as of 9/5/19



8. Chinese companies have a lot of debt to refinance in the next three quarters. The good news is that rates are much lower...


Source: Bloomberg, as of 9/5/19



9. ...the bad news is that if the loans are bad, the interest rates won't matter much!


Source: Bloomberg, as of 9/5/19



10. Tariffs and retaliatory tariffs on steel, aluminum, cars and other components is having a significant impact on Germany...


 Source: WSJ Daily Shot, as of 9/6/19



11. Unlike much of the developed world, Germany's conservative nature leaves them plenty of room to stimulate...


Source: Alpine Macro, as of 9/5/19



12. If the U.K. voted today on BREXIT, they would likely vote to stay!


Source: NatCen Social Research & Macrobond, as of 9/6/19



We've been talking for some time now about our historically low interest rates and the accompanying disappointing performance in the bond markets. So where can retirees turn for more stable income when bond yields just aren't cutting it? Check out our piece "Finding Total Return in an Ultra-low Interest Rate Environment" for insights straight from BCM Portfolio Manager and Managing Partner, Dave Haviland.


Full PDF: Finding Total Return


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.