Welcome to the Markets and Economic Update, provided by the Hancock Whitney Asset Management team as an informational resource for clients and individuals who are interested in hearing our perspectives on current economic issues.
Paul Teten reviews U.S. growth trends, the main pattern of which this year has been a deceleration in growth from a peak rate of 3.2% in 2018 to 2.0% trends by the end of the third quarter, in conjunction with a global slowdown in manufacturing and capital investment as a result of the trade war. Strong personal consumption at a 5.5% rate in the second quarter slowed to a 2.9% rate in the third. Signs so far in the fourth quarter are that household spending continues to moderate and expectations for Real GDP in the quarter center around a 1.5% rate. We have projected U.S. growth trends in a 2.0-2.5% range this year, with actual growth running at the low end of the range, and our expectation going forward in 2020 is that, in the absence of a meaningful trade truce with China that boosts global growth prospects, U.S. growth trends are likely to slow further toward 1.5%.
Richard Chauvin discusses the possibilities of a narrow “phase-one” trade deal with China in light of President Trump’s recent action to sign the pro-democracy legislation concerning Hong Kong that passed Congress with overwhelming support. This and other recent events appear to lessen the chances of a deal before the 15th, which is the date that additional Chinese imports are set to be hit with tariffs. In addition, The U.S./Canada/Mexico agreement remains uncertain, with a relatively small chance that this deal will be complete by the end of the year due to the short calendar.
We continue with a discussion about the stock market for November, which was a good month for equity investors. Martin Sirera highlights recent performance trends, including the fact that dominant large U.S. tech companies are leading the market higher. Very strong performance was limited to U.S. markets, with non-U.S. markets posting about a 1 percent return in aggregate, led by China having a 1.8% return this month. The S&P 500 through November 30th was up 28% and the S&P 600 Small Cap Index was up 19%. Overall it has been a good rebound from a tough 2018. We also touch on recent merger and acquisition activity and what that could imply for markets, and discuss risks to our cautiously optimistic outlook.
Jeff Tanguis finishes our call by discussing the Fed’s ongoing communication of their satisfaction with current rate policy and the state of the economy. President Trump called a meeting with Fed Chairman Jay Powell at the White House, as the President does not like the fact that the Fed won’t be lowering rates in the near future. Current market expectations are the Fed will not lower the Fed Funds rate before July of 2020.
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