Investing in an uncertain world

Posted by: Paul Donovan

07 Oct 2019
  • The US labor market data gave mixed signals. This is probably useful, as a reminder to investors not to put too much faith in a single data release. Markets had a slight bias to a positive read. Fed Chair Powell gave no policy hints in comments on Friday (Kansas City Fed President George was hawkish on Sunday, as always).
  • In the real world, the consumer is probably still quite happy. A large number of Americans had reasonable earnings growth last month – the weakness was narrowly focused (on technology), and a result of seasonal adjustment. Only economists really notice seasonal adjustment – most people focus on the unadjusted change).
  • US corporations still have reasons to worry, with trade taxes looming. Trade talks between the US and China begin this week. These remain difficult to forecast. US trade policy remains under the control of the US president. It is quite hard to predict US President Trump.
  • The effects of the existing trade taxes are seen in investment spending. Companies are less likely to invest when the supply chains that have been built up over thirty years are being threatened. Investment goods are a disproportionately large part of trade, so taxing trade taxes investment.

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