Last month, Donald Trump became the proud owner of the second-worst November Chicago PMI print in 17 years.
Since 2001, the gauge had only been lower in one November than last month’s 46.3, and that was in 2008.
Amusingly, 46.3 represented a marked bounce from October, when the barometer registered 43.2, a monumental drop from September’s 47.1 print.
Fast forward to December, and the Chicago gauge – which is volatile – printed 48.9, ahead of consensus (47.9) and in line with the general narrative that says the US economy is back on sound footing after a late-summer stumble.
Of course, 48.9 is still below the 50 demarcation line, and a quick look at the breakdown shows new orders, employment, inventories, production and order backlogs all in contraction.
Later, the Dallas Fed manufacturing gauge missed, printing -3.2 versus an expected 0. But that was in the middle of the range. The six-month outlook deteriorated.
The incremental news comes ahead of ISM manufacturing due later this week. The market is desperately hoping for “confirmation” of a factory inflection in light of the growing disconnect between ISM and IHS Markit’s gauge.
Monday morning witnessed some sloppy trading, as stocks took a dive, while bonds sold off and the dollar fell. 10-year yields rose 5bps to 1.93%, steepening the 2s10s to 32.6bp, a new “since October 2018” wide.
Barring some kind of epic meltdown, any losses in equities over the last two sessions of the year are meaningless. 2019 is a blockbuster.
As for what’s in store in 2020, the red line suggests anything between a 12% drawdown and a 28% gain.
Read more: Here’s What Usually Happens After The S&P Has A Blockbuster Year
I wonder how much the tariffs worked as a de facto transitory stimulus pulling demand forward from future periods to get under the wire for the potentially escalating tariffs.
I have been doing a lot of long drives on the freeways surrounding the Port of Boston. Late Aug-Sept, the freeways and truck stops were heavy with trucks. Oct-Nov seemed to slow down and late Nov through mid-Dec was the busiest I have seen including a lot of double trailers. Haven’t been on the road the past 2 weeks. All of this is anecdotal, but I found interesting. I’m interested to see if Jan shows the continued rebound or another move down possibly showing the uptick to be transitory as well.
Prognosticators and traders may have been suffering from Pessimism Fatigue, or simply reading into fourth quarter price action.