Recent Global Events:
- An explosion near the U.S. embassy in Beijing: Bloomberg
- ISIS orchestrates an attack in southern Syria, resulting in over 200 fatalities: BBC
- Iran’s president asserts the country should respond decisively to threats from Trump: The Hill
- Trump announces a halt on European Union trade tariffs: Politico
- U.S. stock market sees a surge following Trump’s claim that a trade war with the EU has been averted: CNBC
- U.S. tax cuts are accelerating the federal budget deficit more quickly than anticipated: NY Times
- Secretary of State Pompeo confronts Senators regarding policies on North Korea and Russia: USA Today
- New home sales in the U.S. saw a decline of 5.3% in June: MarketWatch
- The 2-year Treasury yield, sensitive to policy changes, rose to 2.66%, marking a decade high.
The stock markets in both the Middle East and the United States have demonstrated a notable advantage over other global markets this year, based on trading data up until July 24. While these two regions exhibit solid gains, many other areas have experienced losses to date this year.
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Key Developments:
- The Trump administration proposes a $12 billion aid package for farmers affected by trade tariffs: CNBC
- Trump urges the European Union to eliminate all tariffs before trade negotiations: Bloomberg
- Israel downs a Syrian fighter jet intruding into its airspace: CNN
- Secretary of State Pompeo heads into a contentious Senate hearing focused on trade and foreign policy: The Hill
- U.S. business optimism remains high despite looming threats: NY Times
- U.S. Composite PMI indicates strong economic growth in July, with inflation on the rise: IHS Markit
- Richmond Fed manufacturing index declines in July but still points to robust growth: Bond Buyer
- U.S. stock market rally propels the S&P 500 Index to its highest point since February: Reuters
While trade tensions and geopolitical uncertainties pose threats to U.S. economic growth in the latter half of the year, current analyses suggest that published data continues to show no alarming signs. Recent estimates of the U.S. business cycle indicate a slight cooling trend, though it remains ambiguous whether this is a signal of impending challenges or merely noise in the data. Clearly, the available indicators indicate a sustained period of growth.
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Current Affairs:
- Iran states it will retaliate if the U.S. attempts to restrict its oil exports: Reuters
- Trump is contemplating revoking security clearances for former Obama officials: The Hill
- North Korea is reportedly dismantling a significant aspect of its missile launch facilities: Bloomberg
- California’s electricity grid operator urges residents to conserve energy: Reuters
- Slowdown in growth reported in the Eurozone as indicated by the Composite PMI for July: IHS Markit
- Chicago Fed National Activity Index shows a rebound in June: Bond Buyer
- U.S. existing home sales have decreased for the third consecutive month in June: HousingWire
- Analysts predict significant growth in corporate earnings for the second quarter: NY Times
Non-U.S. equity markets saw the best performance last week among the major asset classes, as tracked by exchange-traded products. Conversely, U.S. real estate investment trusts (REITs) experienced a decline for the second consecutive week as of trading on Friday, July 20.
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In the News:
- Trump warns Iran via Twitter: “Never, ever threaten the U.S.”: Reuters
- G-20 finance ministers express concern over the rising risk of trade wars: NY Times
- China asserts that threats and intimidation regarding trade will not work: Reuters
- China denies any intentions to devalue its currency to enhance exports: Bloomberg
- Trump criticizes the Federal Reserve’s rate hikes, yet an increase is still anticipated: MW
- Federal Reserve’s Bullard indicates that U.S. yield-curve inversion is becoming increasingly probable: MNI
- New York Fed’s Q2 GDP nowcast for the U.S. drops to +2.7%: NY Fed
Please note that The Capital Spectator will be temporarily pausing its regular updates as we relocate to Palermo for a week. Normal updates will resume on Monday, July 23. Ciao!
● Copycats and Contrarians: Why We Follow Others… and When We Don’t
By Michelle Baddeley
Summary via publisher (Yale University Press)
Rioting teenagers, volatile stock markets, and the rise of religious terrorism may seem unrelated, yet they are all driven by instinctual behaviors such as herding and imitation. In our interconnected world, these group decisions often lead to undesirable outcomes. The rapid spread of information across the globe can distort group sentiments, leading to economic bubbles, irrational skepticism towards experts, significant political shifts, and more. Drawing from diverse social, behavioral, and natural sciences, Michelle Baddeley delves into when and why herding occurs and its often mixed results.
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The escalating trade conflict may present challenges in the latter part of the year, but forecasts indicate that U.S. GDP growth for the second quarter is set to improve. The projected median growth rate is expected to rise to 3.1% (seasonally adjusted annual rate), a substantial increase compared to a paltry 2.0% growth in the first quarter. The Bureau of Economic Analysis will release its initial report for Q2 GDP growth in two weeks on July 27.
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