Yippie Ki Yay: A Christmas Story





December 8, 2019



It’s that time of year again … when family and friends come together and … debate whether Die Hard is a Christmas movie. Unfortunately, I cannot weigh in on that debate (I’ve never seen Die Hard), but I can say with confidence, the US economy is Hard to Kill (I have seen that one).





According to the U.S. Bureau of Labor Statistics’ Employment Situation Report, the US economy add 266,000 jobs in November blowing out analyst estimates of a 184,000 gain. The previous two months were also revised higher, September was revised from 180,000 to 193,000 jobs added and October added 156,000 revised from 128,000. Astute investors pay close attention to the revisions, particularly the direction of the revision. The Positive revisions coupled with significantly exceeding analyst’s expectations suggests the US labor market is extremely strong and essentially at full employment. The Unemployment rate also declined 10bps from 3.6% to 3.5%, versus analyst’s expectations rates would remain unchanged.


The strength in US labor markets likely means the US Federal Reserve will leave rates unchanged when they meet later this month. With many other developed countries around the world offer negative interest rates for their government debt, the Fed would be well served to leave themselves some wiggle room should the economy weaken some time in 2020. While rumors of the demise of the US economy have been greatly exaggerated, there is one thing which could deliver the death blow, a fundamental breakdown in US/China Trade talks.


This past week President Trump gave mixed signals on progress in US/China trade talks. Last Tuesday, Mr. Trump said he liked the “idea” of waiting until after the 2020 US election before finalizing a China deal, but by Wednesday, he said things were going “very well.” Then again on Friday, Larry Kudlow, Mr. Trumps Economic Advisor said, the President was not ready to make a deal.


Whatever your opinion of Mr. Trump, he is a skillful showman and manipulates the media to his benefit. Shaking up trade talks distracts from his impeachment hearings. Delaying additional tariffs on China until at least December 15th, minimizes the impact on consumers, allows the economy to continue humming along, and keeps Mr. Trump from being a Grinch this holiday season. I would not be surprised if a trade deal was “delayed” until the fall, paving the way for a “huge” October Surprise announcement of a big beautiful trade deal.