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As the U.S. economy continues to slow, the nation's banks are turning off the liquidity spigot on small businesses. An ominous factoid: The last time loan volumes to small businesses turned this negative (on a year-over-year basis) it was December 2007, the exact month the U.S. economy tipped into recession.
Here are the key Chart of The Day takeaways from the Thomson Reuters/PayNet small business data via Hedgeye CEO Keith McCullough in this morning's Early Look:
If you run a small business look out. If you're an investor getting long equities into this economic slowdown, go look at returns from October and November of 2007. Those returns might scare some sense into you.
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Netflix, the American streaming and entertainment company, reported earnings earlier this week, and the stock jumped as much as 20% in after hours trading as international subscriber growth sharply exceeded guidance. Hesham Shaaban, Hedgeye’s Internet and Media analyst summarized the good and bad of the company’s earnings.
Stocks are up so no worries, right?
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Takeaway: Slow growth, distrust in institutions & lack of opportunity are a few reasons for Trump's remarkable rise to GOP presidential contender.
...Donald Trump's rise from ribald real estate developer and reality TV star to Republican presidential nominee is remarkable. He has clearly tapped into a growing and gnawing feeling of economic and political insecurity.
The table was arguably set:
Anxious Americans are also concerned about the widening income gap (partly as result of Federal Reserve financial asset inflation). It doesn't help that the top 20% of U.S. households account for almost two-fifths of consumer spending with the top 10% possessing 84.5% of U.S. financial assets.
Contributing to this insecurity are effects of slowing U.S. economic growth.
As you can see in the chart below, this is a domino effect, with the cascade of negative data hurting U.S. growth. Gross domestic product (GDP) continues to decline from its peak of 3.3% in March 2015. It’s just 1.2% today.
Meanwhile, there's a growing distrust of America's institutions.
From politicians to the mainstream media, confidence is withering. Take a look at the Gallup polling data below. People were asked "how much confidence" do you have in each of the following institutions. Respondents answering "a great deal" or "quite a lot" has been slipping across the board for two decades.
As our Demography Sector Head Neil Howe points out, this is a decisive shift in the national mood. It will have a lasting impact:
"Trump’s candidacy thus becomes more plausible if one believes, as I do, that the prevailing social mood in America is rapidly changing. Donald Trump (and Bernie Sanders) are “pre-seasonal,” to use a term I sometimes give to public figures who anticipate the new direction. Hillary Clinton, by contrast, is “post-seasonal,” her outlook firmly rooted in the old regime while struggling gamely to adapt.”
The shift is real. And whether or not Trump is elected (we're not so quick to declare his campaign dead) doesn't necessarily matter.
The winds of the national mood are shifting. A lasting and profound realignment of the old order of things may be coming.