Market skepticism continues, as the chart for the DJIA as of 1/3/2019 demonstrates:
CNN/Business‘ analysts are blaming the drop on …
Apple warned it will badly miss its quarterly sales forecast because of weakening growth and trade tensions in China. …
Beyond Apple, investors were also rattled by the biggest one-month decline in US factory activity since the Great Recession. The closely-watched ISM manufacturing index tumbled to a two-year low, providing further evidence of slowing growth and pain from the US-China trade war. ISM said manufacturing activity is still growing, but suffered a “sharp decline” last month.
“Awful, and worse to come,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote to clients on Thursday. “Trade wars are not easy to win.”
WaPo has a deeper analysis of the Chinese economy, suggesting the world’s second largest economy may not only be slowing down, but – a problem common to autocratic nations – may not be putting out trustworthy numbers:
While a number of factors may have played into Apple’s travails, including political tensions and a trade war with the United States, the news from the company’s Cupertino, Calif., headquarters seems to affirm a warning that Chinese economic observers have been sounding for years, particularly in the last few months: The slowdown in China’s economy might be worse than many appreciate — and so, too, are the spillover effects.
“China’s economy is definitely slowing quite a bit across a bunch of sectors, and this slowing momentum is likely to continue for another couple of months at least,” said Arthur Kroeber, founder of Gavekal Dragonomics, a research firm in Beijing. “And consumer confidence is definitely down, which is probably part of what’s behind the Apple numbers.” …
Although Chinese officials report that GDP has been growing at more than 6 percent a year for a few years, “it looks truly like some sixth grader got out their ruler and drew a straight line with a slight downward slant,” said Christopher Balding, an expert on the Chinese economy at Fulbright University in Vietnam. “It’s totally unrealistic.”
And it’s unrealistic to think that an economy that large could continue to grow at 6%. After all, that implies that the inputs must also grow at roughly the same rate, and when it comes to tangible inputs such as metals, lumber, even sand for concrete, well, it can be quite difficult to expand an input by 6% when the base number is already quite large.
And then deal with the accompanying environmental damage.
So, assuming the Chinese are found to be cheating, what will that mean for the global markets? Beats the hell out of me, but I don’t think I’ll be off in left field if I state it’s going to be a bad thing. Add in the GOP’s destructive tax “reform” of 2017, Trump’s unsurprising lie that Trade wars are easy to win!, Trump’s Shutdown, and what we may be looking at is that tired old saying, A perfect storm.
Hang on tight and keep some powder dry, as they say. Try not to fire prematurely; the ejection of Trump from the Oval Office may be a salient signal of light at the end of the tunnel, although Pence is a relatively unknown quantity, and his time as Indiana’s governor was discouraging.
