US economy still booming in 2018 Q4 despite naysayers

Late post, since I am trying to solve my Twitter dilemma.

The feds announced Thursday morning that US economy grew at a 2.6% rate for the 4th quarter, defying all the recession hawks panicking stocks at the end of 2018.

The growth was a surprise to the upside as doom and gloom Wall Street analysts were looking for 2.0% growth at best. Like some of the news organizations that skew the news to their agenda, if Wall Street was looking for 2% growth, then how could they have been concerned about recession.

The Obama administration would have celebrated 2% growth most quarters during its eight years of economic malaise. As you can see from the market reaction since the dramatic year-end sell off, investors were not buying the news Wall Street was selling.

“The reading adds some reassurance after the near-panic in financial markets in 2018’s closing weeks, as the stock market bottomed on Christmas Eve and has roared back since then,” said Bankrate senior economic analyst Mark Hamrick.

On a year-over-year basis, 2018 GDP rose 3.1%, the highest print since 2005, certainly something President Trump will ballyhoo once he gets back in this hemisphere after cutting short his meeting with North Korean leader Kim Jong Un in Vietnam.

Corporate R&D lead the way with spending soaring 3.5% annualized in Q4, climbing 9.9% over the last year.

Corporate R&D spending now represents 2.3% of US GDP, an all-time record. Rising R&D spending signals increased productivity growth in the near future as new processes are generally aimed at reducing costs on manufacturing or systems services.

“If secular stagnation is a thing, US firms are fighting like hell to avoid it,” according to Renaissance Macro’s Neil Dutta latest note.

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Looks like the Fed overshot again with rate hikes

As I wrote Wednesday morning prior to Fed chief Jay Powell’s announcement of standing pat on Fed funds rate.

Stocks and the gold price took off on the news that the Fed statement took all the language out of their plan to look at raising rates, due to recessionary fears. The Fed is currently at 2.5% on the rate.

What does this mean? Well appears that Powell & Co. may have overshot — once again — restraining lending too much and may put the US economy into negative reading on growth.

As I wrote at the time, the December rate hike was not needed since the Fed had already taken much of the air out of the economy through pricking the asset bubble in stocks.

Now due to the government shutdown we will not get our first reading of fourth quarter growth, which would normally be out Thursday, until later on in the month. However the Fed probably had a good read on that GDP number, which is probably below 2% growth.

 

Dark forces in the stock market

What we are witnessing in the stock market is unprecedented with moves mostly lower, but with a record-breaking break out to the upside on Wednesday.

The 1,086 point move on the Dow was the highest point move ever. The question Tuesday morning is why will we give back more than 400 points to the downside?

These moves and the huge slide before Christmas feel like a tug of war between two factions.

One with a need to damage the economy along with President Trump’s claims that he is succeeding where his predecessor failed.

The other side is somewhat muted in its response to this highjacking of the markets.

How else do you describe the latest moves?

Fed chief Jay Powell appears to be in with the first camp. How else to categorize four rate rises this year while enjoying full unemployment without finding inflation in the couch cushions.

In all my years of market watching I have no other idea of what we are witnessing in the markets. The moves are unprecedented, so therefore a new thought n the cause is needed.

The dark forces in the market are attempting to take the economy into recession through cratering consumer confidence by taking the wealth effect away from Americans. Next will be to repeal the tax cut in the House in 2019.

With these initiatives the Democrats feel they have a better shot of gaining the White House in 2020. It’s a nefarious plan backed by Democratic money in the markets.

Let’s see who will ultimately will win the war for hearts, minds and wallets.

Stocks up, wages up, unemployment down. How could the Midterms be close?

As a financial writer in real life, I find it odd that the economy is not being ballyhooed by the Republicans more during this Midterm election. Or should I say not mentioned in the media more.

Stocks, as measured by the Dow Jones industrial average, are up 25% since President Trump was elected.

No the only focus the stock markets get nowadays is the recent gyrations in October, which also overshadowed the latest wage data showing a pay raise of more than 3% according toLabor Department data released Wednesday. The wage gains make sense since there is now a decades-low unemployment rate.

An argument could be made that the recent stock pullback story has much to do with a concern that the Democrats could possibly win the House of Representatives.

Certainly Wall Street has a growing concern that Rep. Maxine Waters could take over the leadership of the House Banking Committee. The same Maxine Waters who told protestors to go after Administration members of Republican members of Congress if you see them in a restaurant or the movie theater.

It’s not a question of impeachment, because that will never be in the cards, since the Democrats will never have enough votes to get charges brought and passed onto the Senate. No the real question is what do the Democrats stand for economically?

There’s very little evidence of any economic platform or any platform except being anti-Trump. But no one calls them out on this.

A perfect example of this is in San Francisco, where the Democratic Mayor and city council want to raise real estate and business taxes to stem the tide of growing homeless people defecating in the streets among other quality-of-life issues.

Left-leaning Silicon Valley firms like Google and Amazon among others are squawking over having to pay more taxes. Threatening to move out of the city if they are forced to pony up cash to alleviate a problem they caused by moving in and distorting the cost of housing in the Bay Area.

So where is the left’s economic thought? Clearly tax and spend doesn’t resonate with its biggest boosters — California tech companies.

And I would say it does not sit well with many institutional investors as well.

Chinese trade tariff tiff will melt in August heat

We are in the midst of summer doldrums. Markets reading tariff headlines and reacting to mounting trade war.

I prefer to call it a trade tariff tiff, since it’s all blather as no country will stop trading with the US. While the markets reeled over the newest $200B in tariff against China, this will not be enacted until mid-August, so there is plenty of wiggle room for it to work out prior to the deadline.

The markets seem to agree with this premise since on Thursday stocks are retracing back almost 90% of Wednesday’s loses.

Short post today as there is little else going on.