Manufacturing - Problem Child of the Economy

The January edition of Macrogram highlights the current state of the economy. The chart-based newsletter shows the weakness in manufacturing, calls attention to the current slope of the yield curve and covers key macroeconomic indicators. Macroeconomic insights at-a-glance.


  • Low inflation and sluggish growth in the Eurozone have prompted the European Central Bank to set interest rates at a negative 0.50%. The U.S. fed funds rate, currently at a target range of 1.5% - 1.75%, is widely expected to remain at that level for the coming months.
  • The yield curve 'un-inverted' in October. A yield curve inversion is often associated with a looming recession; however, the interest rate picture may be distorted by the unprecedented amount of negative-yielding debt in parts of the world, which entice investors to purchase long-term U.S. treasuries in search of safety and yield.
  • The economic activity indicators continue to present a mixed picture. While manufacturing remains weak, consumer spending, employment and housing indicators point to a resilient U.S. economy.
  • The uncertainties surrounding tariffs disrupt supply chains, stifle business investment and slow down global manufacturing and trade.
  • The OECD expects world real growth to be 'stuck at 3% over the next two years'. For the U.S., the OECD forecasts real growth of around 2% for 2020 and 2021.

Maycrest Capital’s Investments in the Current Environment

Maycrest Capital invests in the U.S. stock market following its long-bias tactical ETF strategy. Asset allocation decisions are based on signals provided by the firm's proprietary BearCasting® model, which incorporates economic, sentiment, and technical indicators. Maycrest Capital’s BearCasting® model indicates that the firm's equity strategy should currently remain invested in the U.S. stock market.

Indicators and Trends to Watch

Interest Rates

Fed Meeting December 10-11, 2019 - With inflation under control and a tight labor market, the Fed maintained the target range for the federal funds rate at 1.50 - 1.75%, as widely expected. Fed Chair Powell cited 'persistent' and 'significant' inflation as potential trigger for future interest rate hikes. The market was pleased with the message.