Playing games

Minute by minute 

We saw the meeting minutes from September’s FOMC meeting when the committee decided to cut interest rates for a second time this year. The minutes indicated the Fed’s heightened downside economic risk and recession probability today compared to a few months ago. The decision to cut rates, for some members, was driven by the possibility that it may “help forestall layoffs.” All the flashing caution signs. Fed Chairman Jerome Powell’s commentary this week acknowledged the slowdown in economic activity and also provided context around the Fed’s “soft” quantitative easing through balance sheet expansion and short-term yield curve control

Moral of the story: The Fed is clearly weary of the slowing business environment having an adverse impact on the labor market and, in turn, the consumers who have driven economic growth. While easing monetary policy from the Fed is being received well by the stock market, earnings season will indicate whether the impact is actually flowing through to the businesses. It’s never a good thing when so many signs are pointing toward the end of this economic cycle, I’m all about playing defense in the market right now. 

Jobs jobs jobs 

The number of job openings fell for the third straight month in August, marking an 18-month low for this metric. The sectors most impacted were manufacturing and information services (mainly media and public relations). However, the number of job openings is still comfortably higher than the number of unemployed Americans looking for jobs.

Moral of the story: The slowdown in hiring has been notable as businesses have slowed spending in the wake of all the uncertainty. Companies were having difficulty finding the appropriate skilled workers last year while they’re able to fill critical positions today. The most notable change is that companies are just cutting back on the number of positions all together. At least we haven’t started seeing layoffs yet, but yet another flashing caution sign. 

Never Have I Ever…

… been interested in pre-season NBA games, but the Nets vs Lakers game in China was on my radar this week. ICYMI, Houston Rockets GM tweeted his support for the protestors in Hong Kong, China was not pleased and called for the NBA’s Chinese partners to end their relationship with the NBA, the tweet was deleted, and an apology was issued by the NBA (I have so many thoughts on succumbing to the Chinese communist bullying like this, but will refrain. At least this incident highlighted China’s lack of free speech to those who may not have been previously aware of the situation.) Later in the week, Chinese delegates were in DC working on trade negotiations and Trump announced Friday afternoon that they had reached a “very substantial phase one deal.” The first part of the trade deal is expected to be drafted over the next three weeks to address intellectual property, financial services, and agriculture. 

Moral of the story: China’s reaction to a tweet from an NBA GM indicated to me that the regime is currently shook. While the progress toward some form of a trade agreement might indicate weakness and a willingness to give into Trump’s demands, the Chinese government’s ability to, within one week, force a US company into a corner was eye-opening. If they start doing this with other US companies with significant exposure to China, it could cause some serious harm. Hopefully other companies have the guts to stand up to the bullying…