Equities rallied after China indicated it would not immediately retaliate against the latest tariff increase.  Even though second quarter GDP data is now stale, the recessionary narrative is prevalent in its interpretation.  Headlines read “US economic growth slowed in the second quarter by more than initially reported on weaker readings for categories including exports and inventories.”

Growth did slow to a 2.0% rate from the initially reported 2.1% pace.  Historically speaking, the revision is nothing but noise.  Consumer spending which makes up two-thirds of the economy grew by 4.7%, the biggest gain since 2014.  Initially consumer spending was reported to have increased by 4.3%.

Real final sales, which excludes trade and inventories, increased by 3.6% versus the initially reported 3.1% gain. This data point is regarded by most as the more accurate statistic of underlying strength.

This data should not have surprised anyone based upon profit reports of Target, Wal-Mart and Dollar General.

I will write 2% growth is far from robust but it is also far from recessionary as both the narrative and the bond market is suggesting.  The economy expanded by an average 1.5% pace from 3Q08 through 4Q16.

The Federal Reserve has described the US economy as “robust” but is facing considerable headwinds.

All must remember the US does not follow the world into a recession, it leads the world.  Moreover since WWII a predicted recession has never occurred.

I will maintain my optimistic economic outlook until there is weakness in the jobs market and a deterioration in home prices in the secondary and tertiary markets. Housing prices have stalled or some instances declined in the largest markets, but prices in the secondary and tertiary markets are now approaching 2008 levels.  Most people gauge their net worth by the value of their homes.

Regarding jobs, the vast majority of employment statistics indicate hiring is strong and in some instances the ability to find a job is the easiest on record.

What will happen today?

Last night the foreign markets were up.   London was up 0.73%, Paris up 0.90% and Frankfurt up 1.17%..  China was down 0.16%, Japan up 1.19% and Hang Sang up 0.08%.

The Dow should open nominally higher.  The 10-year is off 7/32 to yield 1.52%.


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