It would be a mistake to judge the US economy by its stock market level alone. With falling interest rates and little alternatives there has been a surge in equities but it has also meant valuations are too expensive. The GDP figures, under analysis, for the US show an ongoing decline in manufacturing and investment by companies and where there has been high earnings companies have opted for share buybacks and special dividends instead, despite the last big stimulus. The US economy is now dangerously dependant on consumer spending as was the case prior to the GFC. Economic growth last quarter was running at 2,1 percent. Overall earnings of companies are down and leveraging and debt is high . New house construction data was down last month. The US employment rate was reduced by half a million after further data collation.recently. Germany is in recession with shocking negative rates becoming the norm in many places. The UK had a drop in GDP and what lies ahead is still murky re Brexit and affect of any deal or no deal. South America and many countries in Europe are already in a very tough spot. Global growth continues its decline. The US and China will not be immune to this.
The trade deal is unlikely to go through this year at least , and the bar for a good deal goes up the longer it takes. China's economy will have .9% of its growth cut once the next round of tariffs start being felt next year. This could increase.
I agree with Yellen that given the unique current factors at play the scary yield curve is not as definitive as it was in terms of predicting a recession but it is an important indicator still.
I will resume buying MFG once it drops below 46 because I agree it will go down less than others but until then there are just too many fires out there and economic conditions that make a recession, and a very long deep one , given lack of stimulus with rate cuts this time around, more likely than not by the end of next year.
MFG Price at posting:
$49.99 Sentiment: Hold Disclosure: Held
(20min delay)