Wednesday, October 2, 2019

Well, well, well, the odds of a Fed rate cut in October just popped to 65 percent, which is up from 40 percent after the most recent ISM Purchasing Managers Index dropped from 49.1 in August to 47.8 in September. The cycle peak was in August of 2018 at 60.8. So far, none of the rate cuts have promoted an increase in the US equity markets. They have done nothing more than stall and turn down. I wouldn't put my money on this being the low for ISM either.

The myth of household balance sheets doing better has been put to bed once again showing that consumers are piling on more and more debt. According to Mr. David Rosenberg, "Incredibly, roughly one third of new vehicles sold in the first half of 2019 were for terms longer than six years. A decade ago that number was 10%. The average loan now stretches out to an amazing (record) 69 months. It is becoming more common now to see 85 month terms or longer (these never existed before). In sum, Americans now have a total of $1.3 trillion of auto debt on the liability side of their balance sheet - that compares to $740 billion a decade ago."

On the personal income front, there have been some interesting stats on which states have shown an increase in income and which have seen a decrease in income with recent policies. According to Jack Ablin of Cresset, "...breaking down personal income growth by red and blue states yields dramatic differences between them. Blue states, defined as voting for Hillary Clinton in the 2016 election, saw their one-year income growth - while still high at 4.8% - slip slightly from 4.9 percent five-year annualized rate. Meanwhile, Trump-supporting red states saw their income growth climb dramatically from the 5-year annualized rate of 4.2 percent to 5.1 percent over the last 12 months. Florida and Texas were the biggest red state contributors, with their incomes climbing 5.6 percent and 6 percent, respectively, over the last 12 months."