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Global Slowdown,Trade War and the Fed’s Belated Blink

Lakshman Achuthan on CNBC’s Closing Bell to discuss ECRI’s public outlook

Growth Rate Cycle and Inflation Cycle Downturns
The market has been going down because, until yesterday, the Fed looked set on multiple rate hikes in the face of a stealth slowdown and an inflation downturn that ECRI called months ago.

From ECRI’s perspective, what’s really driving things are these cycle downturns in economic growth and inflation, due to which the Fed has belatedly blinked.  

Whenever growth is decelerating, the risk of stock price corrections ramps up, as I warned on Trading Nation at the end of the summer.

OPEC / Oil
Today oil is up, based on Russia and the Saudis agreeing to production cuts, but let’s be clear: the cuts are needed because global growth is slowing.

That’s becoming clearer in the U.S., as the jobs data suggests. And it’s even worse abroad. Not only is GDP growth negative in Canada, but GDP also declined in Q3 in Japan, Germany, Italy, Sweden and Switzerland. And most don’t know that Russia is in recession, which could undermine their promised production cuts.

Trade War
According to ECRI’s Global Industrial Growth Long Leading Index (GIGLLI), the global industrial slowdown was baked in the cake when the year began.

Mind you, that was when the PMIs were still riding high, and everyone and their brother was so excited about synchronized global growth.

And if you look at the hard data on actual global industrial production growth, it’s been falling all year.

So the trade sanctions were as potent as they turned out to be because they arrived after this cyclical downturn was already underway. We’ve already had a one-two punch -- a cyclical slowdown and then trade sanctions.

Bottom line: the global slowdown is not about the trade war. We know this because our leading indexes were pointing to it well before trade war talk started.

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