Today's post marks our third chart blog post of this active week in the markets. As our newly released strategy commentary reported, and our primer on Tariffs from this morning, we are closely following the inflation and tariff situation. In addition, in the charts below, you can see a closer look into global and U.S. debt measures, the Chinese yuan falling in value, factor performance for 1Q18, and ADP's private payroll report... plus the March jobs report released this morning.
1. Everyone fasten your seat belts! As if the threat of trade wars was not enough...
With ADP's private payroll report showing stronger than expected job growth (241,000 actual versus 210,000 expected), all eyes are on today's official jobs report for signs of wage inflation. January’s job report spooked the market and caused the first 10% pullback in 2018. Why? Because accelerating wage growth has historically pushed the FED into raising rates faster and farther than necessary. This has contributed to or caused the recessions (grey areas) noted below. The FED raising rates has preceded 85% of all recessions since the FED was founded in 1913.
Source: WSJ Daily Shot; As of 4/3/18
2. Austerity?! Look what a $2 trillion budget deficit can do...
Source: WSJ Daily Shot; As of 4/5/18
3. When politicians promise more to its citizens than the economy can provide...
The government's spending is being funded with debt. What are we getting for all this debt? Roads? Bridges? Hospitals? No. We get little to no tangible benefits or assets society can use now and into the future. All we are getting is more debt our future selves will have to grapple with.
Source: WSJ Daily Shot; As of 4/5/18
4. Improving employment is not isolated to the U.S.
Source: WSJ Daily Shot; As of 4/4/18
5. Parabola up, parabola down. Every mania driven bubble since the Dutch bulb crisis looks similar...
Source: WSJ Daily Shot; As of 4/5/18
6. Let's not tempt fate...
Source: WSJ Daily Shot; As of 4/5/18
7. Markets can act irrationally in the short term...
Source: WSJ Daily Shot; As of 4/5/18
8. Over $20 trillion in debt and the average maturity is ~5 years. And a $2 trillion annual budget deficit will add ~10% each year. What could possibly go wrong...?
Source: WSJ Daily Shot; As of 4/5/18
9. A nice update on "Smart Beta", or factor performance, in 1Q18.
Source: WSJ Daily Shot; As of 4/2/18
10. A look at who has been buying our debt.
Source: WSJ Daily Shot; As of 4/2/18
11. Ironically, a stronger Yuan would lower our trade deficit with China...
Source: WSJ Daily Shot; As of 4/2/18
12. As you can see from our piece on tariffs...
Source: Deutsche Bank, WSJ Daily Shot; As of 4/4/18
13. When we lost many of our manufacturing jobs.
Source: Deutsche Bank, WSJ Daily Shot; As of 4/6/18
14. Setting realistic expectations...
Source: WSJ Daily Shot; As of 4/6/18
15. Patience and calm....
Source: WSJ Daily Shot As of 4/4/18
For explanation beyond charts on how 1Q18 has influenced what is happening now in the markets, make sure to check out the BCM 1Q 2018 Market Commentary if you have not done so already.
Download as a PDF: 
Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.
