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Illustration: Aïda Amer/Axios
For much of the year, equity bulls bought stocks on even the faintest hint of good news about companies or the economy, pushing U.S. indexes to new all-time highs despite a slowing economy and negligible earnings growth.
What's happening: Stocks have been driven higher by 3 main catalysts: hope for a resolution of the U.S.-China trade war, expectations for easier central bank policy and a strong American consumer. It's still possible that all 3 come through to boost asset prices this year, but downside risks have come to overpower optimism in recent weeks.
What they're saying:
The big picture: While most economists caution they are not expecting a global or U.S. recession in the next year, there is little on the horizon in the way of good news.
The bottom line: U.S. equity investors are now seeing a brand new stock market. In this market, traders sell companies with bad balance sheets and no profitability plans, and the market goes down when leading economic indicators point toward recession.
As Axios Markets readers know well, the U.S. manufacturing sector has been in recession all year, which continues to worsen with Tuesday's data from the Institute for Supply Management showing manufacturing activity fell to its weakest level since June 2009.
Why it matters: "ISM at 47.8 is bad but new export orders at 41 is even worse," Deutsche Bank Securities chief economist Torsten Slok said in a note. "There is no end in sight to this slowdown, the recession risk is real."
After seeing its stock price plunge 26% in Tuesday trading, brokerage firm TD Ameritrade announced it would offer free stock, ETF and options trades, starting Thursday.
Threat level: Investors are worried that the race to the bottom, now clearly in full swing, will blow a hole in the profitability of online brokerage companies. Shares of the companies already were struggling this year.
By the numbers:
Of note: TD Ameritrade makes a particularly large (25%) share of its revenue from commission fees, according to analysts at investment bank JMP Securities.
Flashback: "Your mama pays full commission."
Investment in Chinese assets fell significantly this year as a combination of the trade war and increasingly attractive opportunities elsewhere spread money across a variety of locations in the emerging world.
Why it matters: The White House has reportedly floated the idea of cutting off U.S. investors' access to some Chinese investments, but data shows President Trump's trade war has already significantly reduced the level of Chinese securities purchased by foreigners.
What they're saying: The flow of funds out of China has largely gone to other emerging countries, particularly Saudi Arabia.
Yes, but: Chinese investments bounced back in September when emerging market stocks and bonds registered nearly $38 billion of inflows, according to IIF data released Tuesday.
Illustration: Aïda Amer/Axios
Axios' Joann Muller writes: The UAW strike against GM is now in Week 3, and the longer it lasts, the worse Michigan's fragile economy becomes — with huge potential consequences for the 2020 presidential race.
Why it matters: Michigan, which voted twice for Barack Obama then narrowly flipped to Donald Trump in 2016, will be a key battleground state in next year's election. A loss in Michigan would raise the stakes for Pennsylvania or Wisconsin. Meanwhile, other states with large auto-worker populations are watching.
Where it stands: The GM strike is now 17 days old, and the pain is starting to spread across Michigan — home to about half the 46,000 striking auto workers — and beyond.
"Workers who are on strike pay are not yet pushed to the wall, but they're certainly not going to go out to dinner and a movie right now."— Charles Ballard, economics professor, Michigan State University
Catch up fast: The strike is the first at GM since 2007 and the longest since 1998.
The bottom line: Workers argue that they gave up a lot to help GM through bankruptcy a decade ago and haven't gotten their share of the company's record profits since.
What to watch: Trump promised Michigan in 2016 that he'd bring manufacturing jobs back to the U.S., a promise largely unfulfilled.