For those looking for solid evidence that the Fed would be smart to slow the rate hike cycle, they of course have it. The shockingly volatile markets of December 2018 combined with low inflation concerns have put the Fed, and rightfully so, in a temporary holding pattern. A slow pace or even a pause in rate hikes in 2019, or at least in the first half of the year, does make sense and if economic expansion slows to 2.0 percent or thereabouts with continued job creation, the Fed, and President Trump, might be good friends in 2019 and 2020.
Of course there have been economic releases that show two sides of the economy, as some manufacturing numbers have been a tad weaker – three months of slower growth or expansion in factories around the country. The labor market, however, has been uber-strong. That last Payrolls release for December was 312,000, a number that was rather strong, and supported the longer term trend of 700,000 jobs created in October, November and December – this only means people are working.
We at Classiarius are still concerned about the health of the global economy, as the possibility of an economic slowdown grows in 2019. This fear of an economic slowdown was a contributor to the S&P 500 index in the US falling 14.3 percent in the final 3 months of 2018.
Trade tensions, fading fiscal stimulus and slower economic growth are still real dangers for 2019 and 2020, more on these issues in upcoming articles and audiovisual presentations.