Global upswing falters
The chart below shows the GDP-weighted average of the "Big 8" whole-economy PMI. This is a good guide to what's happening in the world economy, as the Big 8 (the USA, UK, China, Japan, Euro Zone, Brazil, India and Russia) make up ~70% of world GDP.
After strengthening since April last year, the Big 8 PMI dipped in September, for the first time since April. The recovery which began in April was in response to the levelling off and then the decline in world Central Bank discount rates. Without Trump's tariff wars and the uncertainty induced by random, rapid policy changes, this recovery would, typically, be strengthening and accelerating. Instead, it's faltering.
Yes, it's just one month. It _might_ reverse itself next month. And yes, China is strengthening, apparently. But Russia is in deep trouble, Brazil is sliding fast into recession, the UK is down for the second month, and the US is faltering. An October uptick is entirely possible. Yet, it is not terribly probable, and is likely to be followed (in my opinion) by another fall.
We have two forces offsetting each other: the logical and normal upturn (with the usual lag) after interest rates start falling, and the slump caused by Trump's trade wars and resulting heightened uncertainty. Nothing about the Trump administration heightens confidence; everything suggests to business and consumers that spending delay would be prudent and wise.
I think the fears about the consequences of Trump's policies are winning over the lagged response to interest rates. And of course, that is self-feeding. As economies slow, spending falls further, and the economy slows even more. Remember: everyone's spending is someone else's income. The traditional way to break that nexus is to cut interest rates and to increase government spending and cut taxes. Instead, Trump's tariffs have hit the US economy with a swingeing tax _increase_ and big _cuts to government spending_ , i.e., a significant fiscal _tightening_. And even if the Fed cuts the Fed Funds rate (and there is no guarantee that it will, as long as inflation is rising), the economy responds with a lag.
It's very hard to see this ending well.
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Click on the chart to see a bigger and clearer image
As a matter of interest, look what's happening in Brazil. Brazil's Central Bank raised interest rates. Trump hit them with a 50% tariff, and Argentina (a key trade partner) went into free-fall. Notice how deep the 2016 downturn was, when America "sneezed" and Brazil "caught a cold" (had a deep recession.)