Has the Goldilocks Story Finally Ended?



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Friday, November 16, 2018


It’s almost as if a perfect storm of negative sentiment has descended on the markets in recent times: from open critiques of Federal Reserve interest rate policy to tech leaders like Facebook FB coming under fire for unsavory business conduct to plummeting oil prices signaling a potential economic downturn on the horizon, the reasons behind another pre-market sell-off are becoming easier to understand. Futures are in the red by triple-digits 45 minutes ahead of Friday’s opening bell.

There is plenty to like about our current economic position, globally and historically. We’re at half-century highs in the U.S. labor market. We saw 3.5% growth in Q3 GDP, on our way to the first full year of 3% growth in recent memory. Although political plates are shifting in different regions around the world, we’re not seeing more than a recognizable amount of global strife these days. The U.S.’s position leading the world from its economic meltdown a decade ago remains a shining beacon to the rest of the world’s economies, to which we’ve rightly grown accustomed.

BUT… what’s going to happen in our trade war in China? Will we descend further into pain on both sides of the Pacific or will we reach a new agreement of fairness that will benefit one or both of us? Debt – on both corporation and individual scales – is like a dark cloud looming on the horizon. Does this mean a hard rain is gonna fall (to appropriate Bob Dylan), and if so, how? And when, and by how much?

The question marks regarding the midterm elections that consumed much of 2018 have dissipated, but to what end? Will Wall Street firms – banks, Big Tech, Big Pharma, et. al. – be expected to reign in current business behaviors by way of regulations and increased accountability, and will that somehow generate another down-leg for equities markets?

So many questions. And often, whichever answer materializes may not be what investors consider optimum.

Perhaps a shift in expectations is what’s being asked of us currently. If so, it’s important to recognize it’s nothing we can’t deal with; in fact, coming to terms with the headwinds we might be expected to face will help us avoid some of the worst problems that may otherwise develop. We had Goldilocks living in our house for a good year or more – perhaps it’s time she moved on.

Industrial Production for October reached 0.1% ahead of today’s opening bell, lower than the 0.2% expected, which was also the downwardly revised total for September. Still positive, so that’s something. October Capacity Utilization was better, reporting 78.4% which beat expectations by 20 basis points. September numbers were ratcheted up significantly to 78.5% – the highest we’ve seen in nearly three years. Score one for improved domestic productivity.

Mark Vickery

Senior Editor

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.










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