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CROSS ASSET WEEKLY
16.08.2019

Just another week

Summary
Cross asset weekly pic
It is difficult to say what was the most important event this week: The yield curve inversion in the US and the equity market sell-off, the postponment of some of the US-tariffs on Chinese imports, the primary election results in Argentina or today’s start of the new Bundesliga football-season? By far the largest adjustment in asset prices came in Argentina, which is unlikely to reverse until we get clarity on how big any debt restructuring might be after the general election in October.
It is one sign that globalization has not come to an end if we worry about events that occur that far from each other. The economic dynamic is also more synchronised than last year. For equity markets this is not helpful given that the dynamic is clearly negative and points to a further economic slowdown in the third quarter. However, this slump is not necessarily the onset of a new recession. We see tentative signs from credit and real money data, as well as from new orders and inventories, that the currently unfavorable dynamic will stabilize soon. But the re-synchronozation of the global economy highlights how important global supply chains and trade are. Therefore, it does not really matter if some US-tariffs are postponed or not. What matters is that all those unilateral actions undermine the trust in the global multilateral rules-based trading system. Without trust in their trading partners manufacturers are unlikely to slice their production chain as they did and re-nationalize production. In our first article we argue that we have entered a stage where global trade falls behind manufacturing growth already. This is unlikely to change soon. This will continue to impact equity markets negatively as we discuss in our second article.

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