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Oil Bears Shouldn’t Bet On A Global Economic Meltdown

Markets convulsed at the end of last week after a weak GDP print in Germany and slowing industrial production data from China caused a flight to safety and an inversion in the US Treasury curve for the first time since 2007. From last Wednesday’s high print down to the Thursday low the S&P 500 moved down by over 4%. Then just as quickly stocks pared losses and were right back where they had started by Monday afternoon. Oil markets were largely along for the ride with the prompt Brent contract moving from $61 down to $58 before rebounding back to $60 on the same time frame.

The financial press and social media predictably touched both extremes in covering the chaos. On one side, the normal crew of financial apocalypse prognosticators saw the event as the beginning of the end of the global financial system as we knew it. On the other hand, a more bullish crowd suggested that the yield curve inversion was mere noise within the orchestra of the Trump administration’s economic miracle.

Now that the dust has mostly settled and markets are basically back where they started, we’re thinking both extremes are probably wrong. The truth is, global GDP and manufacturing data have been trending lower for most of 2019 and yield curves have been flattening in order to reflect the waning confidence among investors. Was one German GDP print of -0.1% really a shock? It shouldn’t be. Germany’s economy suffered a negative print in 3Q’18 and has…




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