“Judging by activity measures like retail sales, industrial production and employment, the U.S. economy does not seem to be on the brink of slowing down. But it is a perverse fact that such measures have been at their highest points, and even at record levels, just before falling a few months later under the weight of an economic downturn. Studies show that forecasters are generally blindsided by recessions, precisely because they tend to be preceded by economic strength. There is little reason to believe that it is different this time…
“Household wealth has doubled in the last nine years, fueled by the quadrupling of stock prices and the full recovery of home values since the depths of the financial crisis. On the other hand, median household income barely rose in those nine years at a dismal 7% rate – an annual increase of less than 1% after inflation. The main driver of financial well-being of U.S. households today is wealth, not income.
“The problem with this is that wealth depends on the ups and downs of asset prices, and therefore a bear market can deliver a hard blow to household wealth. Since income is not strong enough to soften the impact, a market decline may well lead to households feeling poorer, which in turn will likely lead to spending less. This can deepen a cyclical slowdown and increase the chances of a recession…”
“The US stock market sank deeper into the red following sluggish economic reports on Monday and bad news from a couple of blue chip giants… A weaker reading from the New York Federal Reserve about manufacturing in the Empire State and a drop in confidence from the nation’s homebuilders weighed on the markets.
“”Investors are zeroing in on this idea of slower growth for 2019,” said Michael Arone, chief investment strategist at State Street Global Advisors. “More people are worried about a recession in late 2019 or 2020.””
“U.S. student loan debt outstanding reached a record $1.465 trillion last month and one particular set of borrowers is having a hard time paying back their loans, according to a Bloomberg analysis of student loan securitization data.
“This debt is raising fiscal risks.”
“More Americans are predicting an economic downturn in the coming year, a shift that could affect President Donald Trump as he seeks re-election. Only 28 percent of Americans think the economy will get better in the next 12 months, according to an NBC News/Wall Street Journal poll released Sunday. Meanwhile, 33 percent expect it will get worse and 37 percent believe it will stay about the same, the survey found.”
“With fears about the next economic downturn looming, banks are taking a step back from risky lending… According to a survey out this month from the Federal Reserve Bank of New York, nearly half of applicants with low credit scores were rejected in the four months ending in October.
“The credit rejection rate was 21.2% that month, well above its reading of 15.7% at the same time a year earlier.”
“The Cabinet will accelerate preparations for a no-deal Brexit today with just 101 days to Britain’s planned departure from the European Union. The Chancellor Philip Hammond is to begin allocating a further £2bn to emergency planning for an abrupt departure from the EU. Brussels will release its latest contingency no-deal planning tomorrow as it seeks to cushion the impact of a scenario which Britain and the EU have both said they want to avoid.”
“Fresh fears are emerging that the British economy is beginning to wilt under Brexit uncertainty after the fashion retailer Asos issued a shock profit warning, causing a plunge in retail shares in the City… Retailers have started to offer steeper discounts than usual in the pivotal pre-Christmas shopping period, amid fears that waning levels of consumer confidence could affect their sales as Brexit draws nearer. A report by accounting firm Deloitte claimed that retailers had launched a record discounting spree in the run-up to Christmas…”
“A slump in Turkey’s industrial production gathered pace in October, prompting warnings that the country is headed for a recession….
“Retail sales suffer worst drop on record.”
“China is staring at a bigger-than-expected slowdown next year as credit shrinks, said an analyst who made her name warning about the dangers of the nation’s credit binge. Total credit in the country, including lending to companies, has “absolutely collapsed” in 2018, according to Charlene Chu, a senior partner at Autonomous Research in Hong Kong. The estimate is a calculation by Chu, who adjusts official figures with elements she didn’t share.”
“Japan’s output gap in the third quarter turned negative for the first time in almost two years, in a sign the Bank of Japan’s 2 percent inflation target will become even more distant due to waning price pressure. A negative output gap occurs when actual output is less than the economy’s full capacity and is considered a sign of weakening demand.”
“It’s been the most radical cash injection in history — a staggering $3.5 trillion, pumped into Japan’s economy over more than five years to slay deflation and kick growth into higher gear. That’s still not enough to save Tomoaki Nagai’s metal parts factory near Osaka and it’s a similar story throughout the world’s third-largest economy.”
“Australian home prices fell sharply again last week, led by continued declines in Melbourne, Sydney and Perth…
“Coupled with prior declines in late November, the falls left home prices in Australia’s largest and most expensive housing markets down a whopping 1.6% over the past month.”
“That’s how much the total value of companies listed on the world’s stock markets has declined since peaking at $87,289,962,917,450 on Jan 28. In other words, almost $15 trillion has been wiped off the global equity market this year.”
“A number of strategists have underscored the recent spate of death crosses materializing—a death cross appeared in the S&P 500 index about 10 days ago and another formed in the small-capitalization oriented Russell 2000 index RUT, -2.32% in mid November. The barrage of pessimistic death crosses isn’t the only worrying sign in markets. MarketWatch columnist Philip van Doorn says more than half of the S&P 500’s constituents are in bear market…”
“Corporate bonds and stocks are to set hand out annual losses on both sides of the Atlantic for the first time since the global financial crisis a decade ago…
“It will be the first time since 2008 that buyers of stocks and credit both get negative returns, and only the second time since at least 1998, data compiled by Bloomberg show.”
“Oil prices are on track for a third straight monthly decline despite efforts by OPEC, Russia and other major exporters to halt the slide. Crude had slunk near $50 in recent weeks but always rebounded. Crossing the threshold was “significant,” said Michael Loewen, a commodities strategist at Scotiabank in Toronto.”