3:00: In this latest issue of my weekly podcast, I look at the flattened yield curve. At market close last Friday, it re-inverted--by 4 bp. And at yesterday's close, the inversion remained… at 3 bp. This is the characteristic pattern of the inverted yield curve as a pre-recession indicator.
4:35: No surprises at FOMC meeting. The FOMC neither hiked nor cut the fed funds rate. But the markets are now radically reassessing their odds of future rate cuts. Today, the markets are saying there is a 60% chance of a rate cut--and zero percent chance of raising rates.
7:05: WHO declared a public health emergency. Last week I said that if the coronavirus continued to gain new reported infections at the rate of one thousand per day, then it would likely turn out to be a much bigger deal than SARS. It turns out that the coronavirus has gained over the last week at the rate of two thousand new infections per day. Additionally, Wuhan residents widely believe it is being under-reported. We should expect markets to get buffeted up and down by breaking virus news for a while.
11:45: Economic news in the U.S. was mixed. On the plus side, the ISM manf PMI jumped to 50.9 in Jan, pushing it above 50 and into the expansionary zone for the first time in 6 months. On the minus side, the Chicago area Business Barometer PMI hit 42.7 in Jan. It's the third time in 7 months that this PMI has been below 45. Nothing like that has happened since the Great Recession.
16:10: Abroad, economic news was mixed. In Asia, the economic news was OK. But many of the indicators may not mean much, since none of them reflect the impact of the coronavirus. In Europe, the big news was the flash GDP estimates for Q4 of last year. In Q4, the Eurozone's GDP grew at 0.1%, nonannualized. That's the weakest quarterly growth rate for the Eurozone since 2013. The number was brought down by fourth quarter GDP contractions in both France and Italy.
21:25: A new Millennial brand of conservative-Green alliance. A few weeks ago, Sebastian Kurz was re-elected chancellor of Austria. what's interesting about Kurz is his great popularity, his Millennial nice-ness, and the fact that he is leading the conservative People's party. The fascinating new twist is that he has jettisoned his extreme right-wing ally, the Freedom Party. And, to replace it, he has now recruited the Green Party to join him in power.
26:10: Iowa ends in a chaotic mess. A complex new preferential voting procedure and a sketchy new voting app has created mass confusion around the numbers. No matter who ends up winning most of the Iowa delegate, this confusion and disorganization is the worst possible advertisement for the Democratic Party.
28:25: The humanities are hitting a wall. A dirge-like series of essays in the Chronicle of Higher Ed discusses the current status of the liberal arts… and it’s not good. Colleges cut 651 foreign language programs from 2012 to 2015. The number of English jobs advertised by the Modern Language Association has dropped by 55% since 2009. And assistant professors in the humanities are applying for food stamps.
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