Trade War
This isn’t a trade war, this is a return salvo that’s calling out our “friends” for allowing China to use their countries as conduits for cheap industrial metals. Sadly, our key trading partners have already allowed so much capacity to be usurped by subsidized Chinese production, they are simply playing along willing to accept lost jobs and capacity for the great news of cheap products.
I don’t think this will last very long, but I think the timing is important ahead of key negotiations with China, North Korea and efforts to adjust our NAFTA agreement. Critics are calling this an effort to go it alone, which is far-fetched, and others are railing about our shabby treatment toward our friends. Don’t make me laugh! We’re amid a trade war that we have been losing for a long time because we never fought back. The news and hyperbolic response is pressuring the market, but don’t let that sway your investment actions, unless it’s to buy the dip.
The Economy
Lots of economic data and corporate earnings out today and the net impression is the U.S. economy is really ripping.
Personal Income and Spending
This morning’s report blew away Wall Street consensus for the second consecutive month. Not only was the data robust, but March readings were revised higher.
Consumer Trends | Apr | Mar | Est |
Income | +0.3% | +0.3% | +0.3% |
Spending | +0.6% | +0.5% | +0.4% |
The US economy is coming on strong driven by a more confident consumer, which is largely reflected in the stock market where the majority of brick and mortar retailers have posted great financial results and guidance. The notable stocks lower today are names that generally fare better in recessionary environments.
The winners include:
- JLL
- TLYS
- KIRK
- PERY
- BURL
- AEO
- PVH
The losers include:
- DLTR
- DG
- GES
Manufacturing Data
After drifting for several months on the manufacturing side, the Chicago PMI report crushed consensus.
- Headline 62.7 from 57.6
- New Orders 63.5 from 58.0
- Production 65.0 from 59.0
- Backlog 65.0 from 59.0
- Employment 54.7 from 52.1
- Prices Paid 71.5 from 75.
Chicago PMI
The silver lining from both consumer income and spending and Chicago PMI reports are their non-inflation components. PCE was benign for the former and prices paid declined for the latter.