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Investors are starting to worry about the economy

Wall Street doesn't seem to care about the escalating trade war between the United States and China.T...

Posted: Sep 18, 2018 9:46 PM
Updated: Sep 18, 2018 9:46 PM

Wall Street doesn't seem to care about the escalating trade war between the United States and China.

The Dow jumped 175 points and the Nasdaq climbed 1% on Tuesday despite Washington and Beijing pushing ahead with another round of punishing tariffs. Investors are betting the US economy will continue to power ahead of the rest of the world.

Yet beneath the surface, some are getting worried about the ability of the global economy to withstand the trade war and brewing storms in emerging markets.

One in four professional investors is bracing for global growth to slow over the next year, according to a Bank of America Merrill Lynch survey published on Tuesday. That's the worst outlook in this monthly survey since December 2011 and up from August when just 7% of investors were pessimists.

And nearly half of investors surveyed by Bank of America believe the US economy will decelerate and rejoin the rest of the world.

Just one in three said that in August.

"Investors are holding on to more cash, telling us they are bearish growth," Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, wrote to clients.

Not surprisingly, the trade war topped the worry list for the fourth straight month. The second-most popular "tail risk" is related: a slowdown in China's economy.

The survey was conducted September 7-September 13, before President Donald Trump leveled a 10% tariff on $200 billion worth of imports from China AND Beijing said it will retaliate by putting tariffs on $60 billion worth of US imports at a rate of 5% to 10%.

"It certainly does seem that we're approaching spiral stage," Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote to clients on Tuesday.

Anne Van Praagh, a managing director at Moody's, said that higher tariffs will "hurt the economy by distorting prices," creating inefficiencies and having a chilling effect on investment decisions.

'Black Swan' gauge on the rise

Wall Street seemed to take the news in stride: the Dow climbed within 400 points of an all-time high, the first since January.

The VIX volatility index, a measure of market turbulence, declined 7% to a very quiet level of 13. Recall that the so-called "fear gauge" shot up to 50 in February.

However, a lesser known barometer of investor worry is sending more ominous signals. The CBOE SKEW Index rises when option trades signal that concern about a "black swan" incident -- an unexpected event that has a huge impact. The index is trading near the highest level since records began in 1990.

US markets have been bolstered by a strong domestic economy that can hopefully shrug off the trade tensions. The US unemployment rate is sitting at just 3.9%. America's gross domestic product climbed at an annualized pace of 4.2% in the second quarter.

Despite the trade standoff, growth is on track to accelerate to 4.4% in the third quarter, according to a volatile forecasting model from the Atlanta Federal Reserve.

'It's going to be a mess'

The impact from proposed tariffs on GDP growth in the United States is likely to be "very modest," Goldman Sachs chief economist Jan Hatzius wrote to clients on Tuesday.

Hatzius said that while there is a chance that Washington and Beijing reach a resolution, "further escalation seems likely" and the situation is "highly uncertain."

Still, some prominent business leaders are starting to sound the alarm.

The Business Roundtable, a powerful lobby led by JPMorgan Chase boss Jamie Dimon, issued a statement saying that "unilaterally imposing tariffs is the wrong way to achieve real reforms" and threatens "further harm to US businesses and workers."

FedEx CEO Fred Smith told analysts on Monday that the US-China trade fight is "worrisome to everyone" and may already be causing China's economy to moderate.

Alibaba founder Jack Ma warned the US-China trade war could last for 20 years. "It's going to last long, it's going to be a mess," Ma said on Tuesday.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 604608

Reported Deaths: 7642
CountyCasesDeaths
Hennepin1249941780
Ramsey52516897
Dakota46848471
Anoka42782458
Washington27433291
Stearns22559225
St. Louis18142313
Scott17552137
Wright16382149
Olmsted13401102
Sherburne1202495
Carver1067548
Clay826492
Rice8203110
Blue Earth762644
Crow Wing681795
Kandiyohi668185
Chisago620052
Otter Tail586284
Benton582998
Goodhue483974
Douglas475681
Mower470533
Winona461351
Itasca459963
Isanti440164
McLeod430861
Morrison424862
Beltrami407862
Nobles407550
Steele397816
Polk389072
Becker386755
Lyon363853
Carlton353056
Freeborn347133
Pine334923
Nicollet331345
Mille Lacs311854
Brown307940
Le Sueur297326
Cass286232
Todd285633
Meeker263443
Waseca238023
Martin235333
Roseau211221
Wabasha20793
Hubbard196641
Dodge18793
Renville182846
Redwood176539
Houston174616
Cottonwood167124
Wadena163423
Fillmore157610
Faribault154819
Chippewa154038
Pennington153820
Kanabec146828
Sibley146810
Aitkin138937
Watonwan13579
Rock128719
Jackson122812
Pipestone116726
Yellow Medicine115020
Pope11306
Murray107110
Swift106918
Koochiching95418
Stevens92411
Clearwater89016
Marshall88817
Lake83220
Wilkin83213
Lac qui Parle75622
Big Stone6044
Grant5948
Lincoln5853
Mahnomen5669
Norman5479
Kittson49022
Unassigned48293
Red Lake4017
Traverse3775
Lake of the Woods3453
Cook1720

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 371146

Reported Deaths: 6053
CountyCasesDeaths
Polk58273640
Linn21228339
Scott20310248
Black Hawk16167312
Woodbury15241230
Johnson1462385
Dubuque13512211
Dallas1128999
Pottawattamie11229174
Story1071648
Warren584091
Clinton561593
Cerro Gordo554095
Sioux517674
Webster516094
Muscatine4884106
Marshall486876
Des Moines467572
Wapello4338122
Buena Vista426940
Jasper421172
Plymouth403181
Lee382356
Marion366076
Jones301057
Henry294537
Bremer288661
Carroll287152
Boone268634
Crawford268140
Benton259955
Washington257351
Dickinson249344
Mahaska232751
Jackson225242
Clay216727
Kossuth216166
Tama212071
Delaware211143
Winneshiek198835
Page194522
Buchanan194133
Cedar192323
Hardin187544
Fayette186743
Wright186040
Hamilton181951
Harrison180073
Clayton171157
Butler166335
Madison164619
Mills163724
Floyd163442
Cherokee159338
Lyon158841
Poweshiek157136
Allamakee152852
Hancock150334
Iowa149824
Winnebago144531
Cass139255
Calhoun138913
Grundy137333
Emmet135841
Jefferson133535
Shelby131737
Sac130920
Union130035
Louisa129749
Appanoose129049
Mitchell126643
Chickasaw124917
Franklin123523
Guthrie123332
Humboldt119626
Palo Alto113623
Howard105022
Montgomery103638
Clarke100924
Keokuk96832
Monroe96431
Unassigned9530
Ida91535
Adair87332
Pocahontas85822
Davis85225
Monona83131
Osceola78916
Greene78011
Lucas77923
Worth7618
Taylor66812
Fremont6269
Decatur6169
Ringgold56424
Van Buren56318
Wayne54423
Audubon53311
Adams3444
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