World economy talk

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Commodities are getting obliterated

Happy weekend

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for those hoping US stocks to rally

just hope liquidity comes back

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I've been saying the global economy is slowing down (except the US)

So the Fed keeps raising interest rates believing the US economy is strong enough to absorb higher rates

The Fed recently acknowledged that growth is slowing abroad

But as long as the US economy is doing fine, the Fed will keep raising rates UNTIL SOMETHING BREAKS

i said the US isn't immune... everything's interconnected

Something has broken in the US

i believe there will still be a rate hike next month

but going into 2019 the Fed will be more cautious

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for those hoping US stocks to rally

just hope liquidity comes back

...and we're gonna find out tonight

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so much for that "global synchronized growth" everybody was talking about at the beginning of the year

[Monseratto]

DOW closes 617 pts up...

Fed's Powell, in apparent dovish shift, says rates near neutral | Reuters

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neutral rate means an interest rate where it's not high enough to choke the economy but not too low to fuel inflation

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Trump isn't happy about Fed rate hikes

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The current fed funds rate is 2.25%

will be 2.5% in December

i think they'll stop at 3.0% in 2019

[StockEngine]

Powell is proving Trump is correct...


Did Fed’s Powell ‘light the fuse’ for a year-end stock-market rally? - MarketWatch

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Trump hated the rate hikes coz he wanted US stocks to hit all time highs everyday coz it will make him look good

the rate hikes have been making investors reprice asset prices (meaning lower)

it's not about Trump being right

it's about Trump's vanity

Trump wants soaring US stocks during his term so he can boast about it

[uls]

The Fed needed to raise rates coz:

1. to prevent asset bubbles

2. to have enough ammo to fight the next recession

In a recession, central banks cut interest rates to lower borrowing cost to support their economies

if the Fed didn't get rates up from zero, when the next recession comes there won't be anything to cut

well they can go negative

meaning Fed funds rate like -0.1%

so that means your dollar savings account will have negative interest rates too

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as the Fed raises interest rates, the higher rates get transmitted throughout the US economy

that means higher mortgage rates

so what happens?

slower home sales

US new-home sales plunged 8.9 percent in October

WASHINGTON (AP) -- Sales of new U.S. homes plummeted 8.9 percent in October, as the number of newly built, unsold homes sitting on the market climbed to its highest level since 2009.

The Commerce Department said Wednesday that new homes sold at a seasonally adjusted annual rate of 544,000 last month. New-home sales have declined in four of the past five months. Over the past year, sales of new homes have dropped 12 percent as higher mortgage rates have caused would-be buyers to back away.

home prices rise more slowly

US home prices rise more slowly amid weaker sales - News - Sarasota Herald-Tribune - Sarasota, FL

WASHINGTON — U.S. home prices increased more slowly in September from a year ago as higher mortgage rates weighed on sales.

The S&P CoreLogic Case-Shiller 20-city home price index, released Tuesday, rose 5.1 percent from a year earlier. That’s down from a 5.5 percent yearly gain in the previous month. It was the sixth straight month that home price increases have slowed.

or home prices fall

Metro Seattle home prices falling at fastest rate in U.S. | The Seattle Times

It was just this spring when Greater Seattle led the nation in home-price increases. Now, prices here are falling faster than anywhere.

Single-family home costs across the Seattle metro area declined 1.3 percent in September from a month prior, according to the Case-Shiller home-price index, released Tuesday. That follows a 1.6 percent drop the month before, and a 0.5 percent drop the month before that.

Prices haven’t fallen this fast since 2011, when the market was still bottoming out after the recession.

i said the Fed will keep raising rates until something breaks in the US economy

SOMETHING BROKE

that's why the Fed is sounding dovish now

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this was totally expected

Soybean futures in Chicago led gains in agriculture markets after the White House said China agreed to start purchasing farm products from U.S. farmers immediately as part of a trade truce between the two countries.

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check out the yield spread between US 2Y and 10Y







less than 14 bps

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check this out

the 3Y is yielding higher than the 5Y

[Monseratto]

No big sign that say "R" yet...

[Monseratto]

The VIX volatility index surged 25% on Tuesday. The Fear & Greed Index, a CNN Business gauge of market sentiment, fell into “extreme fear.”

Recession gauge flashes yellow

Investors have also grown very worried in recent days about fluctuations in the bond market. The gap between short and long-term Treasury rates has narrowed significantly this week. Before almost every recession, the yield curve has inverted, meaning short-term rates are higher than long-term ones.

The difference between the 10-year and two-year Treasury yields shrank on Tuesday to the smallest since just before the Great Recession. And the less closely watched gap between three and five-year Treasury yields inverted on Monday.

“Inversion is usually the first sign of an economic slowdown,” said Kinahan. He cautioned that further evidence is needed and signs of a recession are not evident in corporate earnings.

The tightening yield curve reflects fears about a growth slowdown and concerns about whether the Federal Reserve is raising interest rates more quickly than the economy can handle. Fed chief Jerome Powell gave a speech last week that investors interpreted as signaling the central bank could slow its rate hikes. However, there is a debate over whether Powell really was telegraphing a sudden change.

Barry Bannister, head of institutional equity strategy at Stifel, predicts the Fed will pause its rate hikes because it has already made monetary policy too tight. He pointed to the slowdown in the housing market caused by higher mortgage rates.

“It’s playing with fire to be too tight and risk an inversion because you don’t know what the outcome will be,” Bannister told reporters on Tuesday. “Even if the Fed pauses, they may have already done too much.”

S&P Global Ratings warned in a report published on Tuesday that “signs of cooling could be emerging” in the US economy. The credit ratings firm raised its odds of a recession in the next 12 months to 15% to 20%, up from 10% to 15% in August. Citing higher interest rates and the fading impact of tax cuts, S&P expects US GDP growth to slow from 2.9% this year to 1.8% in 2020.

“This cycle is either in–or fast-approaching–its latter stages,” S&P said.

But Suzuki, the Richard Bernstein Advisors strategist, cautioned that the markets could be overreacting. He pointed to strong corporate profits and the fact that the yield curve has not yet inverted.

“We don’t see signs of an impending recession,” Suzuki said. “There is a widening gap between market fear of a deterioration in the fundamentals and the actual fundamentals themselves.”

Dow Plunges 799 Points On Trade, Slowdown Fears << CBS Miami


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[Monseratto]

Campbell's soup reportedly in serious financial trouble - New Haven Register

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Dow Plunges 799 Points On Trade, Slowdown Fears << CBS Miami


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US 2Y yield 2.799%

US 10Y yield 2.915%

yield spread 11.6 basis points

lower than yesterday

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that's the flattest yield curve since 2007

[BlancNoir]

Is a recession imminent?

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