U.S. and global economy peak? The U.S. economy, bolstered by the Congressionally-approved tax cut signed by President Trump in December 2017, flexed its muscle. But investors, economists, business leaders and others asked the question, “Is this as good as it gets?” Growth is poised to slow in 2019 and beyond with rising debt and deficits an increasing source of worry. Bankrate’s quarterly survey of economists found widespread concerns about downside risks for the coming 12-18 months. Growth concerns weren’t limited to the U.S. by any means. Signs of slowing were also seen in the Eurozone, Britain, Japan and China.
Stock market records, declines and tech troubles. The good news first: The Dow and S&P 500 indexes rose to record highs in September and October. But trouble signs emerged early in the year and prevailed as the year wound down. The Dow suffered two one-day declines of more than 1,000 points, or about 4 percent of its value. Stocks and the key averages were continuing to slide to lower ground and into correction territory (decline of 10 percent or more). A big part of the retrenchment was big declines in major technology names, like Apple, Facebook and Netflix.
Underscoring a lackluster outlook, earnings growth in 2019 is now expected in the single digits, well below the double-digit gains of the past year.Kelly White ft Duncan Mighty – Donwload Mp3
Amazon creates a stir, surprises with two HQ2s. After a highly-public and, ultimately controversial effort to win concessions from governments, Amazon.com announced that it was splitting its so-called HQ2 and the associated new jobs between Long Island City, NY and Arlington, VA. The decision was said to involve as many as 25,000 jobs for both locations. A backlash followed with critics, and no doubt some of the hundreds of governments making bids, raising concerns about heavy spending on incentives aimed at attracting the new operations, as well as impacts on traffic and property values.
Trade woes and disputes: With a trade war viewed as a major economic threat for the coming year, the U.S. and China agreed to continue talking in early 2019. A truce on tariffs was struck by Presidents Trump and Xi Jinping. But damage might already have been done. By year-end, China’s growth was reported slowing more-than-expected and business leaders said uncertainty was weighing on confidence. Meanwhile, the outlook for Britain’s “Brexit” from the European Union was mired in confusion over the fate of Prime Minister Theresa May’s withdrawal deal, adding to uncertainty. On a more positive front, President Trump and the leaders of Canada and Mexico signed a trade pact meant to update NAFTA. It awaits ratification by Congress and lawmakers in the other two countries.
Housing market slowdown: Between the continued rise in home prices, low supply of homes for sale and the surge of mortgage interest rates, the housing market slowed this year. As of last report, the National Association of Realtors reported existing home sales were down more than 5 percent from a year-earlier. New home sales fell to the lowest level in more than two years.
Fender benders for General Motors and Tesla: The announcement from General Motors that it was shedding up to nearly 15,000 jobs sent a shockwave through the communities affected and drew strong criticism from President Trump. Plans include shutting four U.S. plants and one in Canada. The restructuring comes amid a downturn in vehicle sales with sedans falling most, increasing focus on electric and self-driving vehicles and rising popularity of ride-sharing services like Uber and Lyft. Meanwhile, Tesla Elon Musk had his own problems, some of which were self-inflicted. After Tweeting that he was considering whether take the company private and that funding had been “secured,” Musk settled with the Securities and Exchange Commission resulting in being banned from serving as chairman for three years. Both he and Tesla paid millions in fines. Still, by year-end, Tesla remained a stock to watch. Its market capitalization (or total value of its stock) was substantially higher than GM’s.
Federal Reserve in Trump’s crosshairs: As the Federal Reserve continued to raise interest rates in 2018, President Trump unloaded a series of public criticisms at the same Chairman, Jerome Powell, whom he nominated. Trump indicated that he might regret having nominated Powell, who replaced Obama nominee Janet Yellen. “I’m not even a little bit happy with my selection of Jay,” said Trump. Powell himself appeared to pivot away from comments made in early October suggesting a more aggressive stance toward future rate increases. For his part, Powell said the Fed was focused on its mandate of maximum employment and stable prices. As the year was drawing to a close, there were growing signs that the Fed might take more of a “wait-and-see” approach to raising rates in 2019. In the meantime, savings rates have been going higher, but so too are borrowing costs.
Retail disruption and innovation: Retail sales have been generally solid heading into the heart of the holiday shopping season. There have been plenty of signs of continuing disruption in the retail trade between changes in technology, shifting consumer preferences and rising and falling brand preferences. Sears filed for bankruptcy protection and continued to close stores. Growth in online sales, mostly Amazon, continues to progress. Even the likes of Target and Walmart reported solid growth in online sales. Earlier in the year, once-mighty Toys R Us closed remaining stores. That set off a frenzy by existing retailers to try to capture a piece of the highly-seasonal toy business. Seizing upon nostalgia and sensing an opportunity, the beloved FAO Schwarz name rose from the ashes to open a Rockefeller Center store in New York. With disruption in retail and the disappearance of some stores, mall operators have been getting more creative with how they use space. More entertainment and dining options can be found in malls, as well as more services including smartphone repairs, massage and nail salons and even teeth straightening.
Boffo box office: One of the business stories with a happy, year-end storyline is the resurgence of movie ticket sales. With a strong slate of holiday season films yet to be released, like Mary Poppins Returns and Aquaman, U.S. ticket sales are on track to set a record of more than $11 billion. Black Panther, Avengers: Infinity War, Incredibles 2, Jurassic World: Fallen Kingdom and Deadpool 2 were among the big money makers drawing people to theaters and big screens.
The industry benefitted from success of franchises like the Marvel Comics series as well as renovations of theaters improving the moviegoing experience. That, despite the growing popularity of streaming services, “over-the-top” and other technologies boosting the home entertainment experience which also vie for moviegoers’ attentions and dollars. Offerings from Netflix, Amazon Prime, Hulu, Apple and other services continue to create their own unique content, taking audience away from traditional broadcast and cable television.
Mark Hamrick is senior economic analyst and Washington Bureau Chief for Bankrate.com. He also serves as volunteer president of SABEW, the leading organization for financial and business journalists. He previously served as president of the National Press Club in Washington, DC.