Morning Commentary: Winners and Losers

Foreign Exchange - Morning Commentary
Winners and Losers
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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Despite an overwhelming amount of economic and political uncertainty, the U.S. economy continues to grow at nearly 2% and shrug off much of this negativity. Many economists are still forecasting growth in the 2% range through the next two quarters supported by a strong consumer. But within that picture of steady growth, there are concerns mounting that the economy will falter to stall-speed of nearly 1% or less.

During the last few days, I have been reading numerous stories that reveal a different story about the inner workings of our economy where there are clear winners and losers within our economic and cultural landscape. Here are a few of the key bullet points that I found illustrating this phenomenon:
  • Income inequality: The gap between those at the top and everyone else in the U.S. grew to its highest level in over 50 years according to the census bureau. The issue is beginning to generate greater concern among Americans and could become a more prominent issue for politicians as well as companies.
  • Ultra low interest rates carry a double edged sword: While ultra-low interest rates are supportive for financing home mortgages and car purchases, the prices of those assets continue to climb. Consumers are forced to finance their car loans for longer periods of time to make payments manageable. The average car loan stretches for 69 months which is a new record.
  • Even Major League Baseball is not exempt from the winner and loser phenomenon. Last season saw all-time records for strikeouts and home runs in one season. For the first time ever, four teams had 100 wins while for the second time ever, four teams had 100 losses.

America strives to create a level playing field where all citizens have a chance to excel, reach their potential, and be successful. But America does not guarantee positive outcomes and results. Well intended policies many times have unintended consequences that create uneven outcomes for the economy and for its citizens. Let’s hope we do a better job going forward.

  • Global stock markets are deep in the red this morning as concerns continue to mount about the state of the U.S. and global economy sending “risk-off” signals through the markets. The very weak U.S. ISM report yesterday is still reverberating through the markets. The U.S. ADP employment report today came in slightly below expectations at 135,000 job gains, and U.S. interest rates are lower again today. Odds for a Fed rate cut on October 31 have jumped from 53% on Monday to 68% this morning.
  • The Swiss franc is the weakest of the majors this morning against both the U.S. dollar and on cross rates as Swiss CPI came in weaker than expected at -0.1% instead of 0.1%. The South Korean won is also very weak as North Korea fired what appears to be a submarine-based ballistic missile.
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