And it’s outttt, here’s my fav snippets and a link to the rest of the commentary

We believe that the current business cycle has at least several more years left to run. The major signs that would herald the beginning of the next recession are not yet in place. Unemployment is low and likely to decline further; wages are rising, but not sharply; the Federal Reserve is tightening, but real interest rates are zero; inflation is moving higher slowly; the yield curve is not inverted; profits are increasing; and the leading indicators are still rising. Until some of these indicators change, the expansion is likely to continue.

Mid-term election year stock market performance is notoriously bad. Historically, the market has corrected an average of -18.9% from peak to trough leading up to the election, based on data going back to 1962.

The ECB is buying Italian bonds to hold down yields and providing loans to support local banks. In the end, Italy will have to restrain its spending, but this is likely to create significant unrest and cause political change. Any attempt at austerity will make jobs hard to get and hurt the party in power. On top of this, the immigration problem is adding to instability.

While most conversations on China are focused on the on-again, off-again trade dispute, an understanding that one-third of global shipping, nearly $5.3 trillion worth annually, passes through the newly militarized South China Sea is critically important. For these reasons, a sensible approach is for the United States to try to have a working rather than an adversarial relationship with Chinese leadership. This is only likely to be achieved through judicious compromises. Let’s hope the Administration is prepared for that.

Source: Blackstone 

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