I hope everyone had an enjoyable Thanksgiving meal and time with friends and family. The Smith household always has a nice relaxing day for this holiday. But the markets this week were anything but relaxed. Previously high-flying tech stocks have borne the brunt of the last month's volatility, dragging down the overall market. This is against a backdrop of solid, albeit slowing, economic data. The volatility will probably continue until there is a catalyst to change sentiment and momentum. So, enjoy this week's edition of The Friday Buzz, along with those leftovers from Thursday!
- U.S. and China Tussle at APEC: Twenty-one nations representing 60 percent of the global economy met in New Guinea at the Asia Pacific Economic Cooperation Summit. At the summit the U.S. and China did anything but "cooperate." Both dug in their heels and restated their current positions. There was not even agreement on a joint statement for all the countries, which has occurred at every other summit since 1989. This does not bode well for when President Trump and President Xi are supposed to meet at the G20 Summit in Argentina late next week.
- Retailers Optimistic for Black Friday: Most large retail chains are reporting strong year over year sales for Q3 and are optimistic for the fourth quarter and holiday season sales. Plentiful jobs and rising wages buoy consumer spending. Some of the retailers are reporting smaller profit margins though as they reinvest and reorient themselves for changing consumer spending habits. Those investments are expected to pay off in ensuing quarters and years.
- Americans Are Saving Too: Apparently, not all wage gains are going towards spending. When I hear U.S. consumers are spending, I am always concerned if they are saving as well. Because if they are not, the spending is not always sustainable over the long-term. But the current U.S. savings rate is 6.2%. And that rate has been trending up since 2005.
- An Ensuing Trade "Cold War?" Large trade differences remain between the U.S. and China with few thinking the issues will be resolved soon. But more people are having concerns that the dispute may continue in a semi-permanent state for a long time. This includes former Treasury Secretary Hank Paulson, who fears an "Economic Iron Curtain" between the two largest economies hurting world investment and growth. This article highlights his concerns as well as the effect of the trade war on the supply chain of four different industries.
- U.S. Land Use: Did you know that the land used to grow the food Americans eat is only about the size of Indiana, Illinois and half of Iowa? I didn't until I came across these great graphics displaying how much land the U.S. uses for agriculture, parks, defense, urban areas, etc. Sometimes graphics show a much better story than numbers.
- One More on Trade: Sometimes it is difficult to pinpoint the positive impact of trade because of its complexity. But GDP data can show what happens when trade is negatively impacted. The loss of exports detracted almost 1.8% from Q3 GDP growth. In other words, if exports did not affect the Q3 GDP number, growth would have been 5.3% instead of the reported number of 3.5%. Trade issues are impacting supply chains which may be slowing global growth and could also be one reason for the recent technology pullback, as those companies are greatly affected by both.
- Tax Cut Legislation Loses Impact Over Time: Hidden in the new tax law last year was a requirement for the IRS to switch to a different inflation measurement. Last week the IRS announced it was implementing the new methodology for 2019. This means that over time, tax brackets, standard deductions and other items will increase more slowly. The result will be paying more tax at higher rates. This will result in Americans paying $133B more in taxes over the next decade than if the old inflation measurement stayed in place.
- Gratitude Quote and Ted Talk: "Despite my extreme skepticism, practicing gratitude changed my life. It didn't turn me into some happy-go-lucky person I was never meant to be (or, frankly, wanted to be). But I developed a fundamentally different way of thinking and moving through life, one in which I stopped taking for granted all the tiny good moments that were already part of it. I stopped looking for happiness out there and learned to find it right here." Nataly Kogan, Happiness Expert. Hear her Ted Talk on enjoying life's tiny happy moments.
Thank you for taking the time to read The Friday Buzz. Have a great Holiday weekend!