Thursday, December 6, 2018

Trump the 'Tariff Man' spooks stock market with his economic gobbledygook

When it comes to the global economy, Trump, the self-proclaimed “Tariff Man”, is a one-man wrecking ball. He tweets “Make America Rich Again” but his public pronouncements have the opposite effect. You think not? Then you should read the news about the Wall Street sell-off Tuesday. If that got your guttiwuts jumping about, just imagine what else Trump can do to your investment portfolio.

Here’s the short version from 538’s Wednesday morning significant digits email.

799 points
The Dow was down nearly 800 points — or over 3 percent — yesterday following evaporating optimism for a truce in the U.S.-China trade war. “I am a Tariff Man,” President Trump said on Twitter yesterday morning. [CNN]

For the longer story, also Wednesday morning, the NY Times reports that Trump Warns China That He’s ‘Tariff Man,’ Spooking Stock Investors.

Why the jitters? Here is more from money.com.

This Market Indicator That Frequently Signals a Recession Just Flashed Red

The bond market just flashed a big warning sign for the economy.

For the first time in a decade, a part of the yield curve inverted. On Monday, the yield on the five-year Treasury note slipped below yields on shorter-dated three-year notes, according to a report in Bloomberg.

Typically, bonds with longer maturities offer higher yields, as investors demand greater compensation to keep their money locked away for longer time periods. However, when investors expect interest rates to decline in the future — typically because of a weak economy — they scramble to lock in today’s comparatively high interest rates for as long as possible. By bidding up the prices for long-term bonds, investors can send longer-term bond yields downwards — even, at times, to the point where they fall below yields on shorter-term bonds.

An inverted yield curve frequently presages a recession, although most market watchers typically look more closely at the spread between 10-year and two-year or three-month Treasurys, not necessarily the three- and five-year notes.

Still, an inversion on any part of the yield curve could be a warning sign, according to Bloomberg‘s Brian Chappatta. “The yield curve from three to five years dipped below zero during the last cycle for the first time in August 2005, some 28 months before the recession began,” he wrote.

Here is more from bloomberg.com.

The U.S. Yield Curve Just Inverted. That’s Huge The move ushers in fresh questions about the Fed and the economy.

The Yield Curve Is Inverted! Remind Me Why I Care.

And the arrest of a Chinese tech executive yesterday looks to have driven the Dow even lower this morning.

UPDATE, Dec. 6

  • 9:30 AM EST, DJIA is at 24,593.23, down 433.84 (1.73%).
  • 9:55 AM EST, DJIA is at 24,520.59, down 506.48 (2.02%)

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