One worry us #NeverTrump folks have (I.e., those conservatives not living in the the see-no-evil, hear-no-evil Trumpian cult-of-personality) is an impotent impeachment proceeding post-Mueller report. I say impotent because if an impeachment vote is passed in the House without significant prima facie evidence that is irrefutable with counter-evidence in the Senate, the whole reality TV show episode will just reinforce the "the media and liberals are all against me and my MAGA Deplorables" narrative.
The good news is the stock market "vigilantes" (aka borrowing from the original term "Bond Market Vigilantes" made popular in the late 80's by economist Ed Yardeni referring to how countries that allowed inflation to rise an unacceptable high levels got their sovereign bonds & currencies attacked by hedge funds and short sellers) are doing the economic impeachment work and expect our Dear Father Mr.Trump to end the US/China trade tariff war by March 1 (at worst to announce a long 6-month truce to get something done that is sustainable ) or they will take the wobbly US stock market down into a true bear market with an >20% sell-off and keep it there.
How do I know this?
- The global stock market vigilantes have already crushed the other major global stock markets for major export countries
- Serious reductions in capex/capital spending in the major export economies has already brought most export economies into recession (2+ quarters of negative GDP growth)
- China manufacturing sector contracted in December
The United States is literally the last positive GDP man standing in the in the major economies ex-China--and IF the Trump White House is not able to "stick-the-landing" and resolve this trade tariff battle into a full-blown tariff war, our wobbly economy will follow the others into recession, too.
Why? Because the global economic chaos already caused by Trump's China Trade war brought the world’s leading economies into recession because of the disruption of their 20+ year old global supply chains. Then it brought utter confusion as to how and where to source and invest in intermediate goods production for their capital equipment and manufactured products.
IF the Trump administration fumbles and the POTUS’s tweets of “we are making great strides with the Chinese” are his normal exaggerations of the actual reality and the China negotiations fail, the market event flash crash 20% correction in Oct-Dec 2018 turns into a recession based real bear market and the business expansion cycle is over in 2019.
Why? For one reason, the capex explosion of first half of 2018 turned out to be treated by corporations as a “one-time” event like inheriting money—S&P 500 companies have spent a majority of the windfall NOT on capex spending and wage hikes but on buying back their stock (as everyone OTHER than the POTUS assumed would happen based on recent history of corporate tax cuts and one-time cash repatriation policies). Indeed--nearly 2/3rds of the offshore domain corporate cash for global SP 500 companies remains non-repatriated.
But the bigger reason is the ambiguity and uncertainty on global supply chains over the China/US tariff war has already put the leading global trade partners in recession.
How do I know? Because the world leaders in export trade are now in GDP recession AND their stock markets already are in bear markets— Germany, Italy, China, South Korea, and Japan. Speaking of Japan, the world’s third-largest economy shrank at a 0.3% annual rate during the third quarter and is on track for 4th quarter negative growth aka recession (back-to-back negative GDP) Germany’s economy shrank by 0.2% during the third quarter, and government economists think that the fourth quarter will show negative numbers as well, leaving the world’s fourth-largest economy in recession too. Sweden, Netherlands, and Switzerland also reported negative growth of -.02% during the third quarter. The entire Eurozone is so sensitive to trade that the if deceleration of GPD and earnings-per-share in the US and China--the world's #1 and #2 economies--continues, the EU will continue to move to lower growth in 2019.
And the Brexiting UK? As my Irish relatives would say "Toby it's an economic shite show!"
Bottom line: The Trumponomic US/China Trade War and Trumpian disruption of our Pax Americana global safety net for our allies in democracy leaves companies uncertain of where and when to invest. Uncertainty is hemlock to making long-term capital investment commitments. Manufacturing managers are trying to work out whether to move Chinese production capacity to other Asian nations in order to avoid American tariffs, or whether to stay in China or do nothing at all.
The net result? Managers making long-term capex commitments sit on their hands and "wait till I get a get certain of a long-term runway for capex allocation."
More simply, economic uncertainty is sufficiently pervasive enough by itself to cause an economic downturn in most trade-dependent nations. Right on cue, overall world trade growth has slowed from about 5%-6% year-on-year to only 2% a year as of September, the last month for which data are published by the Netherlands Central Planning Bureau. The January release of world trade growth could very well be negative year-over-year growth.
Conservative and liberal #NeverTrumpers worried about what this mercurial, impulsive, and economic illiterate would do in an economic crisis besides blame everyone else but himself. Now we know--9 months into his "I'm a Tariff Man" performance artistry, he's blaming the US Federal Reserve aka the Central Bank for the slowing US economy instead of looking the blame in the White House mirror.
And worse, unlike some of his other poor decisions, he can't bury this one with cover-up payoffs. This potential unforced error will affect the lives of billions of people.
The whole world's eyes are wide open and watching Trump take the American economy to the brink apparently because he "loves the fight and the drama." If he does not stop the bleeding from the Chinese Tariff War, this Trumpism national nightmare will certainly die a slow painful death.
So at least there is some upside, eh?