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CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers with $107 billion in assets under management.

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The American economic expansion is mere days away from officially being declared the longest in U.S. history. It should be cause for a jubilee given it comes off one of the worst financial crises the nation has ever experienced. However, we are also just weeks away from the one-year anniversary of the start of the U.S.-China trade war. Unfortunately, the latter has taken most of the attention with the early-2019 stock market rebound now at risk of further correction and the Federal Reserve contemplating a rate cut instead of a rate increase. Although the increase in trade tensions has put off investors and businesses, with business confidence and investment decelerating as a result, the U.S. consumer remains in a solid position. The labor market is strong with unemployment near historic lows and wage growth supporting healthy consumer confidence. However, trade wars are an overall drag as they slowly translate to higher prices for consumers and businesses. In the near term, business sentiment and investment should be monitored closely for further deceleration as this could spill over into consumption, which has driven this late-cycle expansion.


Business confidence remains near current cycle lows as increased volatility in the stock market, rising trade disputes, and signals from the bond market have put company leaders on the edge. Moreover, concerns over a deceleration in the global economy, led by lower production out of China and slower growth in Europe, continue to cloud the economic landscape. Although the decline in business confidence should be monitored closely, the strong labor market is displaying that business are still hiring as job listings outnumber the current supply of labor for the first time since records were first tracked in 2000.

JUNE 2019



S&P 500


Fed Funds Rate


37 bps

10-yr. T-Note




*WTI Crude Oil Spot Price. Data points through end of May 2019. Change represents month-over-month change.

Rene Moreira

Both the ISM Manufacturing and Non-manufacturing indices declined in April 2019. The non-manufacturing sector, less impacted by the rising trade tensions between the U.S. and China, is faring better. Services related businesses continue to expand as employment growth in the private sector increases. However, the lack of a trade deal has been a drag on the manufacturing sector since 2018 and the impact is becoming significant. Despite both indices reporting above 50, suggesting that the prolonged economic expansion has room to run, the manufacturing index is flashing yellow.

Source: Institute of Supply Management

Despite a healthy U.S. economy, growth in imports grinded to a halt in 1Q2019 as the trade war with China is now displayed in trade volumes. U.S. exports were not left unscathed either with annual growth the slowest since late 2016 coming in at 2.6% year-over-year. Although a strong dollar and healthy consumer confidence should be a boost for trade, the deterioration in a trade resolution between China and the U.S. will ultimately lead to higher prices for consumers. Additionally, as imports become more expensive and U.S. exports become less competitive abroad trade volumes are expected to decelerate further in the near term.

Source: Moody’s Analytics

Real private fixed investment continued its steady deceleration since mid-2018 as manufacturers and private businesses continue to deal with rising economic uncertainity in the States and abroad. Manufacturing investment posted year-over-year gains of 3.3% in 1Q2019, the slowest pace since early 2017. The private sector, which seemed almost immune to the ongoing trade war, also decelerated but still showed solid gains of 4.7% since the same time last year. As the effects of the corporate tax cuts fade further in the backdrop, combined with the deceleration in business confidence, business investment growth shoud be monitored closely moving forward.

Source: U.S. Bureau of Economic Analysis

The spread between corporate and 10-year treasury bond yields compressed in the last few months as economic uncertainity increased. As the U.S. trade war with China has intensified, the probability that the Federal Reserve will increase rates has now declined substantially, with a possible rate cut now in investors’ minds. Spreads have declined below their long-term average as investors have fled equity markets in fear of the trade war dragging down corporate earnings. Investors’ sudden switch to fixed income has put the rebound in the equity market earlier this year safely in the rearview mirror. If the bands of economic uncertainity continue to widen expect spreads to decline even further as investors look to safety.

Source: Thomson Reuters
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