Fall; my favorite season. Spring and summer are but fond memories as the cool winds blow and whistle through the changing of the seasons. Most mornings you can find me on my back porch with a hot cup of coffee, peacefully reading the day’s manic headlines and listening to the songbirds at the feeders, before their long migration south for the winter.
These are uncertain times (does anyone remember 1998, the 2000-2002 dot com bomb, or GM’s bankruptcy in 2009?) and markets are in uncharted territory given the historic worldwide levels of government debt. But, haven’t they always been?
Our current economic cycle is already long in the tooth, and can clearly last only as long as central bankers continue their grand monetary experiment. Ironically, the Central Bankers used to be the “last resort” when it came to economic growth and asset inflation. Lately, the central bankers are the “first and only resort” on a worldwide basis.
Company buybacks, which remain ongoing, have supported the US stock market all year. Bond markets seem inclined to remain lower for an extended period. Here’s a fun fact: The 30 year US Treasury is currently yielding 2.25%. That is the highest bond yield in the developed world, since most other government bond yields are negative.
So what is the risk at this point? October has historically been a rough month for the stock and bond markets. And regardless of which manic headlines you read (or who you believe), we are inevitably closer to a recession now than we were last year at this time.
The biggest risk these days seems to be the slowing of the US economy over the coming months and into 2020. I do not think any weakness is enough to ultimately lead the economy into recession in the next few quarters, but this slowdown combined with no trade deal with China (the issues are too great and the players are too entrenched to give much on either side of the table), could cause volatility to rise into year end, as it did last December. As always, the consumer is king and we will be watching for signs of a slowdown from the American consumer.
So for now I’ll just sit back and enjoy the peace and quiet on the porch and the cooler temps.