Fed Officials cut rates

Once again the Fed cut interest rates this previous month marking the third time they have done this since July. The reason for the cut is their worries of weakness in manufacturing, trade, and business investment could threaten economic expansion. This seems to be quite a bit amount of cuts in such a short period of time, are their worries justified or do you think this will lead to a larger economic problem with all of these interest rate cuts?

https://www.wsj.com/articles/fed-officials-cut-rates-amid-worries-on-trade-global-growth-11574276730

US Housing Starts Rebound

Building permits are at their highest level that we have seen in over 12 years. This is very big news because even though the mortgage rates are still low, this points to strength in the housing market. There has been an increase in home completion and also, and increase in the stock of homes under construction. This is thanks to the feds monetary policy stances, we have seen as decrease in the mortgage rate. This is so important because the housing industry is one that relies heavily on interest rates. Residential investment has rebounded for six straight quarters which is the longest stretch since the recession. Do you think that this trend will continue along the path that it is going down?


https://www.cnbc.com/2019/11/19/us-housing-starts-total-1point314m-in-october-vs-1point320m-expected.html

US GDP rose a better-than-expected 1.9% in the third quarter as consumers continued to spend

US GDP was expected to slow down significantly in the third quarter. In the second quarter, the growth rate was at 2%, and for the third quarter it grew at an annualized rate of 1.9%. Many economists predicted that the growth rate was going to drop at a much larger rate than what it did. They expected third quarter growth to come down to about 1.6%. Economists are stating that the "better-than-expected" data was as a result of continued consumer spending as well as government expenditures. Many economists predict a recession and a dramatic slow down of the economy, the economy has continued to show the opposite. What are your opinions on the recession? Do you think it is bound to happen? Do you think it will be in the near future?

Tesla Gigafactory in China

https://www.cnn.com/2019/10/24/tech/tesla-gigafactory-china-europe/index.html

Tesla has put a gigafactory in China. The company claims that if all goes well, the company will triple its output. In addition,  Tesla is able to produce cars in China 65% cheaper than the US. In our conference last week we learned that cars are one of the biggest markets between US and China. But Ian mentioned that Tesla would likely only be able to sell cars to some wealthy people. How do you think tesla will perform?

Hikes in the cost of petrol are fuelling unrest in Iran

As the cost of gas is rising in Iran, the government has cracked down on citizen protests for stability.  Irans oil prices are heavily subsidized by the government and the recent 50% increase in price has been caused by a reduction in subsidized.  This has resulted in dramatic instability for its citizens as they cope to deal with cost increases.  Will the government cave to its citizens protests over keeping oil prices artificially low or will prices continue to rise for the Iranian citizens?



https://www.economist.com/middle-east-and-africa/2019/11/17/hikes-in-the-cost-of-petrol-are-fuelling-unrest-in-iran

Global Debt Increasing

Global debt has hit an all time high at $250 trillion in the first half of 2019. It is projected to reach $255 trillion by the end of the year. The first half of 2019 has generated $7.5 trillion. This increase in global debt is due to the borrowing in the U.S and China. In the article "Global Debt surged to a record $250 trillion in the first half of 2019, led by the US and China" by Spriha Srivastava said "China and the U.S. accounted for over 60% of the increase." With the global's debt increasing, it raises concern with investors. The increase in the global's debt might be detrimental to the stock market. 

https://www.cnbc.com/2019/11/15/global-debt-surged-to-a-record-250-trillion-in-the-first-half-of-2019-led-by-the-us-and-china.html

China Diversifying Reserves

In a response to trade tensions with the US, China has began to diversify it's investments of their currency. This move reduces their risk of being hurt by a financial decoupling, which would result in a decrease of investment return. China's decision to move investments to other countries shows that they are less reliant on the US economy, in hopes of gaining leverage on trade negotiations. Aside from this economic factor, I believe it is wise for China to move some of its investments elsewhere, as when investing it is smart to have diversification among investments.

https://www.cnbc.com/2019/11/18/china-diversifying-fx-reserves-assets-to-counter-us-dollar-exposure.html

Weekly Jobless Claims Fall More Than Expected

      The amount of people that are filling applications for unemployment claims have fell which is a very good thing for the workforce. This shows that the workforce is stronger and is growing more than analysts expected or forecasted it to be. The number dropped by a very large 8,000 applications that were filled out. It dropped by more than half of what was forecasted, this can also be due to the strong job market conditions. They also cut interest rates for a third time so that this strong growth in the economy would be supported. My question is, do you expect this number to keep on decreasing?


https://www.cnbc.com/2019/11/07/weekly-jobless-claims.html

Morgan Stanley says global growth should recover in 2020 as trade tensions

and monetary policy ease

Trade tensions and monetary policy are easing for the first time in seven quarters, but the US will experience slower growth as new emerging markets are driving much of the recovery from these tensions. Morgan Stanley claims that real GDP growth will slow from 2.3% in 2019 to 1.8% in 2020. Easing trade tensions will reduce business uncertainty and will ultimately make policy stimulus more effective. But this solely depends on the outcome of the trade war with China, also if Trump ends up implementing the next round of tariffs on December 15th then global growth in the final quarter of this year will slow to 2.8% and a recovery will be delayed until the third quarter of 2020. In 2020 the economy will also grow more slowly as the "bulk of the positive lift from lower interest rates will have been absorbed and households balance higher income with higher prices from tariffshttps://www.cnbc.com/2019/11/18/morgan-stanley-says-global-growth-should-recover-in-2020.html

China is building up its ‘shadow reserves’ to counter its reliance on the US dollar

China has been heavily invested in the US dollar but with the trade war no closer to a conclusion China is being forced to diversify. Until June of this year, China was the largest holder of US treasury's in the world but has recently been decreasing its holdings. Additionally, China is beginning to build up currency reserves in currencies other than the dollar and decreasing its exposure to the dollar. Over this same time period, China has also been buying more gold for its reserves.

China's "shadow reserves" refers to China building up its portfolio of alternative investments to further diversify risk. This includes investing in equities or other projects globally such as their belt road projects.

https://www.cnbc.com/2019/11/18/china-diversifying-fx-reserves-assets-to-counter-us-dollar-exposure.html

The US Economy May Not Grow At All in the 4th Quarter

Despite all-time stock market highs, GDP forecasting models are projecting 4th quarter growth levels between .3% and .4%. This is sobering and conflicting news to Trump stating that the economy is booming. The stock market high is an inflated number, as investors are emptying their pockets after recent news of trade agreements between the U.S and China. To me this is rather alarming considering that there will not likely be a trade agreement in the near future.

https://www.cnn.com/2019/11/15/economy/economy-gdp-fourth-quarter/index.html

Powell Confident In Future of US Economy

In his hearing in front of the Joint Economic Committee, Jerome Powell stated his confidence in our economy. He said that our economy is strong, pointing to our growth, consumption and the level of inflation. He went on to say that the negative interest rates that President Trump continues to push for are necessary for countries with low growth and high inflation, and that is not the case in the States. Overall, Powell was confident that despite many analysts are predicting a recession, the Fed's outlook expects the economy to continue to grow.

Weekly mortgage applications jump to highest level in over a month, as borrowers worry that lower rates may be over

Mortgage rates are increasing again due to an increase in mortgage application volume. This often happens when borrowers realize rates have hit bottom and rush to get in before they move higher. Total mortgage application rose 9.6% last week. Refinance demand, which is sensitive to small rate moves, increased 13% from the previous week and is 188% higher than a year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 4.03% from 3.98%. With rates still in the 4% range refinance activity is expected to see moderate growth until the end of 2020.

https://www.cnbc.com/2019/11/13/weekly-mortgage-applications-jump-to-highest-level-in-over-a-month.html

CHINA-U.S TRADE WAR EFFECTS ON JAPAN

 After the Economic Outlook Conference, I asked a question about how much of an impact the U.S- China trade war especially relating to Japan. Japan's economy has been struggling especially in the 3rd quarter and the U.S-China trade war, its lowest all year. the U.S-China trade war has also affected Japan's imports and exports knocking .20 points of their GDP, also external markets that Japan has its investment and business in having increased in uncertainty due to the high tariffs and unfriendly U.S-China Relations continue to be put on edge. This is nothing too major but at the same time, its something to look at and how this trade war is affecting other large countries' economies.
https://www.japantimes.co.jp/news/2019/11/14/business/economy-business/japans-gdp-growth-one-year-low-u-s-china-trade-war-bites/

The Yield Curve is no longer inverted

A topic we discussed since the beginning of class, is the U.S. yield curve and its inversion. An inverted yield curve means we expect interest rates to fall in the future, and the yield on short-term(3 month) bonds gain more yield than long term(10-year) bonds. This causes businesses to park their assets in longer term investments, and reduces short term liquidity, As we know, Investment is more volatile than GDP, meaning its changes more rapidly.

An inverted yield curve can also be a sign of a looming recession, so its presence worried many economists and consumers for the future. However, now that the yield curve is no longer inverted, this can be good news for our economy and can indicate that we will continue our great economic expansion following the 2008 recession.

https://www.forbes.com/sites/bradmcmillan/2019/11/13/the-yield-curve-has-un-inverted-now-what/#2d363a8b3866