The Economic Data calendar for the week of the 17th of October through the 21st of October is full of critical releases and events. Here is a snapshot of some of the headline numbers that we will be focused on.
In this excerpt from The Macro Show earlier today, Hedgeye Demography Sector Head Neil Howe discusses his post-election outlook. It’s pretty grim.
This will incite gridlock and Clinton won’t be able to get anything done, he says. “The loser of the [White House], in 2016, will feel like an enemy occupied country and will behave accordingly,” Howe says. This will have implications for the Supreme Court, tax reform, and proposed infrastructure spending.
Other questions remain. What happens if U.S. economic growth slips? Or maybe there’s a foreign crisis? “It’s going to get really nasty and I expect the markets to reflect that,” Howe says.
Jason Furman, chair of the White House Council of Economic Advisers, actually said last week, "I don't think you're late cycle... I just don't believe in the concept of late cycle." We crowned that statement "the most glaringly irresponsible statement" of the day.
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Takeaway: The reality is that things aren't as good, underneath the hood.
According to the Wall Street Journal:
This story misses the mark on a number of levels. That supposed "rebound" in retail sales was on the headline number, +0.6% month-over-month. Auto sales were a major contributor to the uptick, +5% on a month-over-month basis.
This only scratches the surface. What investors need to watch is the so-called "Control Group" within retail sales. This is the *all-important data set* that is a proxy for what's input into GDP. On that score, the data was decidedly bad.
This amounts to a sizeable decline in a large GDP contributing data point. In other words...
Takeaway: Many contended China's economy "bottomed" around April. We disagreed. Still do.
Ugly import and export data in China triggered a global equity market selloff yesterday as investors feared a slowdown in global growth.
Now let's back up a bit. This past April China announced growth of 6.8% for the first quarter, down slightly from 2015's 6.9% reading. A slew of headlines and analysts came out of the woodwork arguing "targeted stimulus" would be the panacea helping to stabilize growth. The China "bottom is in," they proclaimed.
CBS: Has China's slowdown bottomed out? (4/15/2016)
CNBC: China's growth holds up as stimulus bears fruit (4/14/2016)
Contrary to mainstream media views, Hedgeye Senior Macro analyst Darius Dale wrote (on 5/2/2016),
"Our analysis renders us firmly on the other side of such hope that China accelerates from here and effectively resuscitates global demand growth enough to stave off continued macroeconomic and microeconomic deterioration in the U.S."
Here's China's (abysmal) trade data reported yesterday for September:
On the news, Dr. Copper (a commodity-market proxy for global demand) resumed its long-term bear market, trading back down to $2.11/lb (see chart below). Meanwhile, China's Shanghai Composite is down -13% year-to-date.
We reiterate our call that Global GDP (and cyclical demand) is entering its slowest part of the cycle (Q4 and Q1). In other words...
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