Weighing the Week Ahead: Will Incipient Headwinds Derail the Economy?

The economic calendar is loaded. The many reports include several of the most-watched. The data may even generate enough fresh news to break the summer slumber. There is plenty of skepticism about the most recent economic data. I expect pundits to be asking:

Will incipient headwinds derail the economy?

Last Week Recap

In my last edition of WTWA I guessed that a boring week would lead to reviews of what strategies had been working in the first part of the year. There was some of that, and it certainly was not an exciting week for financial news. The focus turned to stories with great human interest, ranging in importance from family separation at the border to a CEO replacement for violating fraternization rules, to what Mrs. Trump was wearing on her trip to visit detained children.

And of course, continuing rounds of escalation in the growing trade war.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, including commentary on volume. Check it out.

The market was down 0.88% with opening gaps in both directions on several days. Despite the seesaw appearance, the trading range was less than 1.2%. I summarize actual and implied volatility each week in our Indicator Snapshot section below. Volatility is back into the long-term range.

Personal Note

It is very nice to be recognized as one of the 100 Most Influential Advisors of 2018 by Investopedia. Their criteria emphasize several important communication factors, not just the size of the business. While we have been growing nicely, we are agile enough to provide great service and specialized programs for each investor.

Noteworthy – Worldwide Corporate Debt

Timothy Taylor observes that overall world debt is at an all-time high when measured as a share of GDP. The components of the debt have shifted from government borrowing (during and after the Great Recession, to corporate borrowing. He writes as follows:

Moreover, this corporate borrowing has two new traits. One is that as bank regulators all over the globe have tightened up, this rise in corporate borrowing tends to take the form of bonds rather than bank loans. The other interesting trait is that this rise in corporate borrowing around the world can be traced back to developing economies–and especially to China.

Prof. Taylor has a good summary of a recent McKinsey Global Institute paper. He also reaches several investment conclusions, including care in buying this debt.