We Are the Champions

Did you hear the good news?  The Los Angeles Lakers played a fantastic first half of their opening pre-season game!  Anthony Davis, their new power forward, scored 22 points, and future Hall of Famer Lebron James added 15 himself.  While this first half was an encouraging 24 minutes of basketball, it doesn’t count toward the season’s tally, so plans for a championship parade seem a bit premature. But several talking heads have already suggested this is inevitable.  For Atlas, that’s not enough information to suggest a trend has started even though we are fans.

Economic indicators don’t have a pre-season, but they are reported in discreet periods like months or quarters.  If too few of these periods are considered (kind of like 24 minutes in pre-season game), they might not represent anything other than noise.  Instead, Atlas watches various economic data points over time looking for developing trends. 

Currently, many indicators are decelerating.  Keep in mind that they are growing but doing so at a reduced rate.  This pattern of slower growth makes our economy more susceptible to exogenous shocks, and nowadays, tweets from the general manager of an NBA team or President Donald Trump reverberate globally and have economic impacts.  Our economy is vulnerable, but that does not mean a recession is necessarily in the offing. 

Global trade could present a challenge as it has many headwinds.  Brexit is quickly approaching a deadline; America and China are oscillating between on-again off-again talks; the USMCA hasn’t been ratified by the legislatures of each country.  Any of these could have an exaggerated effect on our economy’s trajectory during a period of deceleration.  Fortunately for America, exports only represents just over 11 percent of our country’s output; the balance is domestic demand.  This could, in part, explain why our nation’s economy has been relatively strong for several years when many other developed economies seem to perpetually flirt with recession.

America seems to remain the best game in town.  Yes, there are some signs of slowing, but they are not so pronounced as to suggest a recession is on the horizon.  Just like 24 minutes cannot forecast the next NBA Champs, there isn’t enough evidence to conclude the prosperous period of our economic cycle is ending.