The Independent Market Observer

The Consumer: The Real Engine of the Economy

July 31, 2019

Last week, the economic growth numbers came in stronger than expected, largely due to the strength of consumer spending. At the same time, concerns remain about the slowdown in business investment. Given these conditions, it occurred to me that now is a good time to look at the economy as a whole, to see exactly what it consists of—and what that view might tell us about the future.

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Fed Set to Cut Rates for the First Time Since 2008: Hooray?

July 30, 2019

There has been a great deal of coverage about the expected rate cut by the FOMC at its regular meeting this week. Markets are counting on a cut of 25 bps (one-quarter percentage point), which has pretty much been confirmed by the Fed. There is even some betting that the cut will be twice as much. In any case, this move has been widely cheered as a necessary precaution—an “insurance cut” in the jargon—to prevent an economic slowdown from turning into something worse. If we step back and look at the big picture, though, there is less to cheer about.

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Monday Update: Latest Economic Reports Better Than Expected

July 29, 2019

Last week saw a number of important economic updates, covering housing sales, business orders, and second-quarter growth. Much of the news came in better than expected, with mixed housing sales serving as the only fly in the ointment. This will be a very busy week for updates, as we finish off July and head into August.

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Economy Continues to Confound the Doubters

July 26, 2019

With this morning’s report on economic growth, we see that the economy has beaten expectations once again. Markets anticipated growth would drop from 3.1 percent in the first quarter to 1.8 percent for the second quarter. Instead, the first estimate is for growth of 2.1 percent. That number doesn’t sound like a major difference, but it’s actually a big deal. Let’s take a look at why.

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Appearance on CNBC’s Power Lunch, July 25, 2019 [Video]

July 25, 2019

The European Central Bank has signaled for a possible change in monetary policy. What could this mean for the markets and investors? I discussed the risks and more today on CNBC’s Power Lunch.

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Will Boris Johnson Get Brexit Right?

July 25, 2019

Today, I’d like to continue the discussion of yesterday’s post on the need to understand what is happening elsewhere in the world. So, let’s take a contrarian look at Brexit and the recent elevation of Boris Johnson to the head of the British government.

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The West and the Middle World: A Review of Destiny Disrupted, by Tamim Ansary

July 24, 2019

For quite a while, the U.S. was focused on other parts of the world. Wars in the Middle East, the Greek crisis, and North Korea all made headlines and were front of mind for many investors. Recently, though, that view has largely faded. We are still at war in Afghanistan, but no one seems to be talking about. A hard Brexit is looming, same thing. Attention has returned to what is happening here in the U.S.

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Deal on Spending and Debt Ceiling Is Good News for Economy

July 23, 2019

This morning’s announcement of the deal between Congress and the White House to suspend the debt ceiling for the next two years is undiluted good news. With an agreement that the government can borrow to spend the money that it has already committed to spending, we can avoid a totally unnecessary, politically driven crisis that could have caused real economic damage. Assuming the deal actually gets passed and signed, it would remove the only near-term roadblock to continued expansion here in the U.S. Like I said, this is definitely good news.

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Monday Update: Retail Sales, Consumer Confidence Highlight Busy Week

July 22, 2019

Last week was packed with economic updates that covered a wide portion of the economy. For the most part, the news came in better than expected, with increases in consumer confidence and spending highlighting the data. This will be a quieter week, with a focus on housing and the first report of second-quarter GDP growth.

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What Earnings Recession?

July 19, 2019

The term recession is having a moment. There is talk of a manufacturing recession, an earnings recession, and, the big one, an economic recession here in the U.S. Worry has been rising with the headlines of slower growth, especially with the recent inversion of the yield curve. Recession is a bad, bad word.

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Are We Seeing Signs of Peak Growth?

July 18, 2019

In retrospect, a good candidate for demonstrating the peak of the boom may be yesterday’s announcement by Netflix that subscriber growth came in well below expectations during the second quarter: the number of subscribers was up by 2.7 million against expectations of 5.3 million. Worse, in its most developed market (i.e., the U.S.), subscriber numbers were actually down by 126,000, against an expected gain of 310,000. This marks the first time the company has ever seen a decline in U.S. subscribers.

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Debt Ceiling Crisis Heating Up

July 17, 2019

An issue I have been mentioning for the past couple of months is finally starting to get some attention: the U.S. is facing a potential crisis as the government runs out of money. Sometime this fall, likely in September, the government won't have the funds to pay its bills.

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Earnings Season: Here We Go Again

July 16, 2019

This morning, I spent some time speaking with a client who wanted to know why markets had slowed down recently. But I am not sure I agree with her. We hit all-time highs just the other day, although in recent days, the market has been taking a bit of a breather. Will that down time continue, or could we get another leg up?

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Appearance on Fox Business Network’s Countdown to the Closing Bell with Liz Claman, July 12, 2019 [Video]

July 15, 2019

Are fears keeping interest rates low? I discussed this and more Friday on Fox Business Network's Countdown to the Closing Bell with Liz Claman.

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Monday Update: Slow Week Focused on the Fed and Inflation

July 15, 2019

Last week was relatively light on the economic update front, with most attention being paid to a couple of inflation figures and communications from the Fed. This will be a much busier week of updates, with multiple major areas of the economy represented.

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Appearance on Yahoo Finance’s The Ticker, July 12, 2019 [Video]

July 15, 2019

What can we expect this earnings season? Friday, I discussed this and more on Yahoo Finance’s The Ticker.

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Magazines and the Market

July 12, 2019

One of my colleagues sent around the most recent issue of The Economist, noting that the cover story, “Riding High: What Could Bring Down America’s Economy?”, may well be a contrarian indicator. I haven’t read the article yet, but I suspect the publication may be in on the irony here. Nonetheless, the fact that The Economist can put this story up could be a sign that the economy really is getting close to a turning point.

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Appearance on Cheddar TV, July 11, 2019 [Video]

July 12, 2019

Do worries keep the economy moving? Yesterday, I appeared on Cheddar TV  to discuss this and more.

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Monthly Market Risk Update: July 2019

July 11, 2019

It’s time for our monthly look at market risk factors. Just as with the economy, there are several key factors that matter for the market in determining both the risk level and the immediacy of the risk. Although stocks remain close to all-time highs, the recent volatility is a reminder that, given valuations and recent market behavior, it is useful to keep an eye on these factors.

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Economic Risk Factor Update: July 2019

July 10, 2019

Although there was some good news last month—job growth bounced back to come in well above expectations—the overall trend remains negative. Confidence has continued to decline, while the yield curve hit an official inversion as of the end of June. That said, conditions remain generally favorable, with all metrics in expansionary territory except the yield curve, but there is no doubt the risk level has risen further. That risk still does not look immediate, but that point may be getting closer.

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A Look Back at the Markets in Q2 and Ahead to Q3 2019

July 9, 2019

Q2 2019: it was the best of times, it was the worst of times. Okay, it wasn’t either, but last quarter we did see something that looked like both. After hitting new highs in April (the best!), markets declined significantly in May for the first time all year (the worst!) and then bounced back in June close to all-time highs. Internationally, we saw the same story, although to a lesser extent, as both developed and emerging markets echoed U.S. performance with an up-down-up pattern. We closed the quarter on a positive note, though, with all major indices up around the world. As far as the stock market is concerned, it was a good quarter.

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Monday Update: Jobs Report Highlight of the Week

July 8, 2019

There were a number of important economic updates released last week, as we kicked off the second half of the year. The most notable release was June's employment report, which came in much better than anticipated. This will be a relatively quiet week on the economic update front, with a focus on the Fed and inflation. 

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2019 Midyear Update [Video]

July 5, 2019

Growth has been solid this year. Consumers remain confident, and business continues to hire and invest. Indeed, markets have responded to these positive conditions, as they are once again close to new highs. If the economy continues to grow and the fundamentals remain solid, which is likely, we should continue to see more progress in the markets.

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Wonderful Wednesday: Independence Day 2019

July 3, 2019

Happy Independence Day! Independence Day is actually one of my favorite science fiction B movies. It gave me one of my best laugh lines for speeches: “You remember the movie Independence Day—it started with aliens destroying Washington, DC. Later on, though, it turned out they were hostile.”

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Monday Update (on Tuesday): Consumer Confidence Drops, Spending Remains Strong

July 2, 2019

Last week saw the release of a number of important economic updates, as we wrapped up the end of the second quarter. Both major measures of consumer confidence declined month-over-month in June, but personal income and spending growth both remained healthy. This week will also see the release of a number of important economic reports, even with the federal holiday on Thursday.

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Market Thoughts for July 2019 [Video]

July 1, 2019

June was a great month for markets around the world, capping off a strong second quarter. With so many worries about slowing growth, earnings, geopolitics, and trade, why are we seeing such strength? The Fed’s more dovish comments at the June meeting had a lot to do with pushing markets up. Plus, the economic data—from retail sales to housing—is solid. For all the worry, things are actually pretty good.

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