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November 27, 2019 | Slowing Economy Undermining Misplaced Over-Confidence

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Data released today from The Conference Board shows that US consumer confidence dipped for a fourth straight month in November as economic conditions weaken into the end of 2019.  While sentiment about the present is still a relatively high 125.5, as shown below, expectations of the future versus the current situation remain at a level that has marked the onset of previous recessions (gray bars below since 1970).

Part of the reason for the future pessimism could be rising layoffs and a decline in hours worked as well as the decline in jobs plentiful minus jobs hard to get (in gray) that has been ongoing since 2018 and is now negative as shown below since 1985, along with declining job openings, compensation plans and CAPEX intentions year over year (in green).

How this impacts the all-important holiday spending numbers remains to be seen. So far, the National Retail Federation expects holiday sales to grow by 4% over last year.

At the same time, we have news today that Mexico–America’s largest trading partner in 2019–officially dipped into recession with a second negative growth quarter ending in September.  Mexico, Canada and China make up about 45% of all US trade in the world. See Recession is edging closer–pass the tequila.

To try and offset growing weakness, the US Fed has been injecting “Not QE” emergency funds into the banking system in order to increase liquidity and attempt to reduce borrowing costs further, but the jury is now in on “ZIRP” and “NIRP” policy efforts, and the results are unanimous as study after study confirms, “once rates go negative, it grows harder and harder for financial markets, and hence modern economies, to operate.”

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November 27th, 2019

Posted In: Juggling Dynamite

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