What we’re reading (8/26)
“The Recession Should Probably Be Here By Now” (Axios). “According to Wall Street's most talked-about recession indicator, the long-awaited economic downturn should be nearly upon us…And yet, there's virtually no evidence the U.S. economy is contracting, putting this indicator's run of correctly predicting recessions — it's called every one since 1955 — in peril.”
“Why The Stock Market’s Summer Doldrums Are Not A Problem” (New York Times). “By bidding down bond prices and raising yields (prices and yields move in opposite directions, as a matter of basic bond-market math), traders have indicated that they consider the economy to be stronger and inflation to be more persistent than had been expected a few months ago. The downgrade of U.S. Treasury debt by the Fitch Ratings agency also contributed to the run-up in rates on Treasury securities. And because Treasuries serve as benchmarks for virtually every other bond and, indeed, for every other investment in the global economy, higher rates have made stocks less appealing in comparison.”
“Despite What Powell Says, The Fed Is Likely Done” (Wall Street Journal). “Speaking at the Kansas City Fed’s annual symposium in Jackson Hole, Wyo., Powell on Friday provided a classic on-the-one-hand, on-the-other-hand speech. On the one hand, the unwinding of pandemic distortions and the Fed’s rate increases ‘are now working together to bring down inflation.’ On the other hand, “the process still has a long way to go.’ Bank lending standards ‘have tightened’ and ‘growth in industrial production has slowed,’ but gross domestic product growth ‘has come in above expectations’ and ‘the housing sector is showing signs of picking back up.’”
“China Is On Edge As Fallout From Its Real Estate Crisis Spreads” (New York Times). “A model Chinese real estate developer in a sector replete with risk takers is teetering on the edge of default. Short of cash, one of China’s biggest asset managers has missed payments to investors. And billions of dollars have flowed out of the country’s stock markets. In China, August has been a dizzying ride.”
“Are We Ready For A $100 Billion Catastrophe? How About $200 Billion?” (Wall Street Journal). “Now, industry estimates peg a replay of Andrew today at two or even three times the inflation-adjusted number, potentially adding up to a $90 billion or even $100 billion insurance loss. And that is before considering what might have happened had Andrew—or Hurricane Irma in 2017, if it had continued on an early course and intensity—actually hit Miami directly, with modeling firm Karen Clark & Co. estimating that insured losses in such a scenario could be $200 billion.”
