Editor's Note: Below is brief excerpt transcribed from today's edition of The Macro Show hosted by U.S. Macro analyst Christian Drake and Macro analyst Ben Ryan. Click here to learn more about The Macro Show.
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Ryan: If you think about it, this fits on the broader sine curve of growth. You’ve had nine consecutive quarters of GDP growth. From a levels perspective growth is still good, but now it’s topping out and you’re going into difficult comps for the next couple months. So sure, there’s room for the savings rate to draw down and that could bolster consumption in the months to come. |
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Ryan: But if you just looked at earnings, obviously the growth rate is very high. We’re halfway through earnings and the earnings growth rate is 25%. You’d say that’s really good earnings growth but from a sequential year-over-year perspective it’s actually down. This is what a lot of the data looks like. Our call for #Quad4 in Q4 (i.e. U.S. growth and inflation slowing) is born out of that fact. Drake: 4Q18 and the first half of 2019 is going to be a less good story. All of this is going to coalesce around the same time. So the sugar high from the fiscal stimulus, when we saw earnings get juiced and start to ramp the last few quarters, will start to fade. When you saw tax withholding changes initiated with tax reform at the household level, all of that is starting to come to pass, we’re going to annualize that then we’re going to start moving past it as we move through the first quarter of next year. So the ‘less good’ is going to coalesce around that same time frame. And we’re already starting to see it. |
