There’s Two Sides To Synchronize

The offside of “synchronized” is pretty obvious when you consider all possibilities. In economic terms, synchronized growth would mean if the bulk of the economy starts moving forward, we’d expect the rest to follow with only a slight lag. That’s the upside of harmonized systems, the period everyone hopes and cheers for.

What happens, however, when it’s the leaders rather than laggards who begin to shift toward the other way?

It’s a question the global economy has confronted four times over the past thirteen years. Each time, at least during the introductory inflection phase, rather than being clear it becomes a muddied mess of disbelief. The word “decoupling” enters the discussion as if “synchronized” applies only in the one direction.

On September 4, 2018, America’s ISM reported its Manufacturing PMI for the month of August had climbed to 61.3. Not only had that beaten expectations of a modest “trade war”-driven deceleration, this would be the highest this index had gotten since 2004. This 14-year best was claimed to be further evidence, along with the declining unemployment rate, of that year’s biggest mainstream themes: stimulus-driven inflation easily overcoming any residual negatives leading toward 2019 finally behaving like the first real recovery since, ironically, around 2004.

The reason “trade wars” had entered the conversation at all had been due to a good part of the rest of the world, particularly global leaders like Japan, Germany, and China, countries who were suddenly stumbling even before mid-year. Rising dollar, too.

If it had been Trumpian tariffs to blame, then why not “decoupling?” When the ISM’s number came out early September 2018, many influential observers saw it exactly that way:

Mohamed A. El-Erian, chief economic adviser at Allianz, tweeted, “In addition to highlighting the strength of the U.S. #economy, this also points to the more general theme of divergence in advanced countries’ economic performance and policies.”

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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