dISMay over tariff impact roils markets
EDITOR'S NOTE
Well, this isn't a great way to start September.
The first major data point of autumn was a pretty disappointing one. The most closely watched U.S. manufacturing gauge--and one of the most followed reports on the economy in general--did what many were hoping it wouldn't do: slip into contraction.
The Institute for Supply Management (ISM)'s manufacturing survey dropped to 49.1 last month, just below the 50 mark that indicates the sector is contracting. This is only a survey of supply managers, keep in mind; it's not an actual reading on output. It's a pretty reliable leading indicator, though, with a long history.
And that's why the Dow promptly tanked, falling more than 400 points at the lows so far, and the 10-year yield slipped below 1.44%.
It's not disaster per se--the index has slipped below 50 in the past without it meaning the expansion is over. It did back in 2016, in fact, when concerns about global growth--and China's economy in particular--were also at a climax. That was another year in which the Fed had to throw out its planned policy tightening, as Stan Fischer's famous "four hikes" speech in January turned into just a lone hike at year-end.
President Trump's election did much to change the trajectory for markets and the economy later that year. Which brings us to today: if the president were, as Bill Miller has suggested, to declare a moratorium on tariffs until after the 2020 election, we'd probably see a similarly euphoric reaction in markets and the economy.
In the meantime, we'll be watching to see just how much--if at all--the "manufacturing recession" spreads to the consumer.
See you at 1 p.m. with much, much more!
Kelly
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