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Illustration: Aïda Amer/Axios
There is doom and gloom abound in the market thanks to deteriorating economic data and growing global uncertainty, but many top fund managers and analysts remain bullish — and it's not just a case of rose-colored glasses.
The big picture: All the talk about recession related to market indicators like the inverted yield curve is becoming a "hysteria," says Sonal Desai, Franklin Templeton's CIO of fixed income.
"Certainly, ongoing trade tensions are weighing on the parts of the manufacturing sector exposed to international trade and have contributed to market volatility," Desai tells Axios. "However, I do not see consumers panicking when we have record [high] levels of employment despite market volatility."
What's happening: Jim Paulsen, chief investment strategist of the Leuthold Group, agrees. He recently argued on CNBC that the market is caught in a "fear bubble" pushing investors into bonds with historically low yields instead of stocks that are near record highs.
He points to the substantial amount of government spending buffeting the economy — "one of the largest non-recessionary fiscal accommodations in the post-war era" — and the accelerating annual growth of real U.S. money supply as factors that should give the stock market a boost for at least the rest of the year.
Watch this space: Investor fear has tipped Bank of America Merrill Lynch's flagship positioning model to a contrarian "buy signal" for risk assets for the first time since Jan. 3, analysts said in a recent note to clients.
Yes, but: Weak manufacturing data Tuesday (see below) capped a spate of declining economic indicators over the past several weeks, including falling U.S. consumer sentiment and imploding manufacturing surveys around the globe.
Axios Markets readers have been highly attuned to the deteriorating state of U.S. and global manufacturing for months now, but on Tuesday Wall Street took its first real interest in the data.
By the numbers: The ISM's manufacturing survey came in at 49.1 in August, well below consensus and signaling the entire sector is contracting for the first time since 2016.
What they're saying: "If there was any question whether or not the trade war was hurting manufacturing sentiment, today's release cleared that up with the insightful observation that '[c]omments from the panel reflect a notable decrease in business confidence,'" Lyngen writes in a Tuesday note to clients, quoting directly from the ISM release.
Between the lines: The spread between ISM's new orders reading minus its inventories offers context for the recent trend, Lyngen adds.
Seeking to uphold the 2015 Iran nuclear deal and maintain some semblance of peace in the Gulf, France has proposed offering Iran about $15 billion in credit lines if Tehran comes back into compliance with the agreement, Reuters reports.
The catch: The prospective deal hinges on the Trump administration not blocking it.
Why it matters: Iran is a key player in the oil market and its declining economy is a key risk for the Middle East and Europe.
The fight over the future of monetary policy at the Fed sharpened publicly on Tuesday ahead of the upcoming meeting this month.
What's new: Boston Fed president Eric Rosengren made the case against another cut to U.S. interest rates while St. Louis Fed president James Bullard said he would be in favor of a 50 basis point cut.
Why it matters: The Fed delivered the first non-unanimous rate decision of Chair Jerome Powell's tenure in June and in July it saw 2 dissenting votes.
The intrigue: Bank of America Merrill Lynch research analysts said in June they were anticipating as many as 3 dissenting votes at that month's meeting. There was only 1, but more could very well be coming.