● US Wholesale Inventories Unexpectedly Decline by 0.1% in October | RTT
● Optimism Among US Small Business Owners Continues to Fall | Gallup
● Declining Gas Prices May Be Encouraging Increased Consumer Spending | CBS MoneyWatch
● The US Middle Class No Longer Represents a Majority | LA Times
● Fed Tightening Poses Risks for Share Buybacks | Reuters
Consumer discretionary stocks continue to lead as the best-performing sector in US equities over the past year, while the energy sector remains in a bearish trend. However, the technology sector has shown signs of recovery recently, prompting analysts to suggest that this positive momentum could further drive tech stocks higher.
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● US Job Openings Decrease While Hiring Remains Steady in October | WaPo
● Small Business Optimism in the US Dips in November | 24/7 Wall St
● Emerging Markets Anticipate Slower Growth | BBC
● China’s Consumer Inflation Quickens in November | RTT
● China Guides Currency to a Four-Year Low | WSJ
Market apprehension is rising once more. Although the US stock market (S&P 500) has recovered the losses incurred during the August to October correction, numerous indicators within the Crash Risk Index are signaling potential concerns. Though the overall danger remains relatively low, this uptick in risk is the highest we’ve seen since early October, when uncertainties regarding China’s economic slowdown first emerged, raising fears of a global recession.
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● Fed’s Labor Market Conditions Index Slows in November | EconoTimes
● The Conference Board’s US Employment Trend Index Declines in November | CB
● US Consumer Spending Remains Unchanged in November | Gallup
● Consumer Credit Growth in the US Slows in October | WSJ
● Chinese Exports Decline for the Fifth Consecutive Month in November | RTT
● Japan’s Economy Shows Growth in Q3 According to Revised Data | Bloomberg
Last week’s report from the ISM Manufacturing Index dropping below the neutral threshold of 50.0 in November for the first time in three years has led some to declare that the US economy might be on the brink of a new recession. While there may be some truth to this, relying on a single indicator to analyze business cycles can lead to significant errors. Conversely, reporting on frequent contractions makes for captivating news segments.
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Yield-sensitive assets in foreign markets led the performance charts last week among the major asset classes, as represented by various proxy ETFs. The iShares International High Yield Bond (HYXU) took the top spot with a robust 2.8% total return over the five trading days through December 4. Following closely in second and third place were foreign real estate (VNQI) and broadly defined commodities (DJP), respectively.
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● US Job Growth Exceeds Expectations in November | Bloomberg
● Strong November Jobs Report Suggests Potential Fed Rate Hike | LA Times
● Summers Voices Doubts on US Capacity to Absorb Real Rate Increases | FT
● German Industrial Output Weaker than Expected in October | Bloomberg
● China Outlines Strategy to Reduce Dollar’s Influence | Bloomberg
● Oil Prices Drop After OPEC Fails to Reach Consensus on Output Cuts | Reuters
● The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression
By Scott Sumner
Summary via publisher (Independent Institute)
Economic historians have made significant strides in understanding the causes of the Great Depression. However, it wasn’t until Scott Sumner’s work that a comprehensive exploration of the economy’s various dynamics was provided. In “The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression,” Sumner presents a thorough analysis that integrates both monetary and non-monetary factors contributing to this crisis. By utilizing financial market data and contemporary reports, he reveals that the Great Depression was fundamentally a tale of disastrous policymaking—by central bankers, legislators, and two presidents—centered on monumental mistakes tied to monetary policy and wage regulations.
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According to the latest report from the US Labor Department, private payrolls increased by a solid 197,000 (seasonally adjusted) in November. While this number is lower than the previous month’s upwardly revised figure of 304,000, it appears sufficiently robust to encourage the Federal Reserve to begin increasing interest rates as early as this month.
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The financial landscape shows mixed signals; while some sectors are performing well, others face challenges. As we navigate through these fluctuations, close attention to economic indicators and market reactions will be essential for making informed decisions.