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 10:46 PM
Updated: Sep 18, 2018 10:46 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.

Indiana Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 164581

Reported Deaths: 4143
CountyConfirmedDeaths
Marion26055792
Lake14436358
St. Joseph9606168
Elkhart9271138
Allen8647231
Hamilton6400115
Vanderburgh617162
Tippecanoe396715
Porter347550
Hendricks3418134
Monroe335638
Johnson3286130
Delaware311575
Clark306263
Vigo275340
Madison250896
LaPorte239261
Cass229724
Warrick205065
Kosciusko201127
Floyd187468
Howard169466
Bartholomew147958
Marshall147428
Dubois146426
Wayne142031
Grant133539
Henry133030
Boone129150
Hancock124744
Noble122935
Jackson121018
Dearborn103128
Morgan100340
Lawrence96838
Gibson94412
Clinton92416
Daviess92334
Shelby90632
LaGrange82815
Knox81810
Harrison81024
Posey7767
Putnam77616
Fayette76719
DeKalb76011
Jasper6885
Miami6715
Steuben6608
Montgomery63122
White62316
Greene57838
Adams5607
Scott55413
Decatur52839
Ripley4838
Whitley4836
Clay4617
Sullivan45714
Wells45611
Huntington4455
Starke4438
Wabash4439
Orange42425
Spencer4176
Randolph39210
Jennings38713
Washington3873
Franklin38325
Fulton3785
Perry36914
Jefferson3655
Pike35718
Carroll34313
Jay3386
Fountain3293
Tipton28423
Vermillion2721
Parke2564
Rush2464
Blackford2394
Newton23711
Owen2151
Martin2050
Pulaski1783
Crawford1631
Brown1473
Ohio1337
Union1140
Benton1130
Switzerland980
Warren911
Unassigned0236

Ohio Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 200231

Reported Deaths: 5217
CountyConfirmedDeaths
Franklin32468642
Cuyahoga20452685
Hamilton17564344
Montgomery10959190
Butler8727131
Lucas8549375
Summit6978269
Warren446566
Stark4045182
Mahoning3863287
Marion345650
Pickaway309246
Delaware299728
Lorain286289
Fairfield284257
Licking274367
Clark263157
Clermont262238
Wood262082
Greene249942
Trumbull2380134
Allen228974
Columbiana218588
Miami213258
Lake206959
Medina197242
Portage172468
Mercer159629
Wayne155871
Ross148939
Richland143024
Tuscarawas138627
Athens12812
Erie119454
Darke119051
Hancock113327
Putnam112527
Auglaize110618
Madison108115
Lawrence98525
Shelby96414
Muskingum9534
Scioto9219
Geauga89850
Belmont81127
Union7993
Ashtabula76048
Sandusky74022
Huron72915
Holmes71611
Preble67718
Seneca63614
Ottawa61030
Fulton57115
Henry53117
Crawford5268
Clinton50613
Defiance50513
Jefferson4994
Jackson4928
Highland4756
Fayette46110
Logan4573
Ashland4359
Knox42516
Champaign4233
Brown4103
Morrow3872
Perry38511
Washington38124
Hardin36713
Williams3664
Guernsey3658
Coshocton34412
Pike3340
Gallia30613
Wyandot30313
Van Wert2905
Paulding2392
Adams2266
Carroll2217
Meigs21412
Hocking2129
Monroe17818
Noble1660
Vinton1093
Harrison863
Morgan830
Unassigned00
Fort Wayne
Overcast
43° wxIcon
Hi: 52° Lo: 41°
Feels Like: 40°
Angola
41° wxIcon
Hi: 50° Lo: 38°
Feels Like: 37°
Huntington
Overcast
42° wxIcon
Hi: 52° Lo: 41°
Feels Like: 39°
Decatur
Overcast
43° wxIcon
Hi: 53° Lo: 41°
Feels Like: 43°
Van Wert
Overcast
43° wxIcon
Hi: 53° Lo: 41°
Feels Like: 43°
Sunny Wednesday
WFFT Radar
WFFT Temperatures
WFFT National

Community Events