Bill Murray’s character is a crotchety newsman who lives the same day over and over again. After exhausting other options, he chooses self-improvement and eventually escapes the cycle.
The movie came to mind last week when the United States and China headed to the negotiating table. Again.
Global stocks rallied on the news. Again.
The U.S.-China trade war has had a significant impact on stock market performance during the past two years. Since the trade war began, U.S. stock markets have rallied when trade talks are announced and retreated when trade talks fail.
Last week, Fox News pointed out U.S. companies and consumers are feeling the effects of tariffs and that could be detrimental to U.S. economic growth, especially if consumer spending slows.
Regardless, major U.S. indices posted gains last week after the United States and China agreed to a new round of trade talks. Ben Levisohn of Barron’s explained:
“Why did the market soar? Not because of the economic data, which still paints the picture of a decelerating U.S. economy. August’s payrolls report came in light, and would have been even worse if not for a big boost from census hiring. The Institute for Supply Management’s manufacturing index fell below 50, signaling a full-blown contraction in industrial activity.”
Maybe, this time around, trade talks will deliver a trade agreement. If not, be prepared for more possible volatility.
Nobel laureate economist Robert Shiller stated in an interview on Bloomberg this week that he “wouldn’t be at all surprised” if U.S. home prices started to fall. Shiller warned that fears of a recession driven by economic narratives such as the trade war and inverted yield curves could be just enough negativity to weigh on consumers’ desire to purchase a home.
Last week, home sales, mortgage applications, housing starts, and permits all missed expectations. The “canary in the coal mine” moment for housing prices will come when some of the hottest markets begin to roll over. But wait — one already has: Seattle, the home of Amazon, Microsoft, Starbucks and many other hot, growing companies. Seattle’s Home Price Index (HPI) went negative year-over-year in May. Should another hot market do the same, showing that Seattle is not an anomaly, we’ll have a trend — and not a good one.