This year’s slowdown in US economic growth has been accompanied by stronger headwinds in manufacturing and housing. History suggests these are clear signs that recession risk is elevated and it’s merely a matter of time before the business cycle succumbs. But optimists say that consumer spending, supported by what’s expected to be a new round of rate cuts by the Federal Reserve, will save the day and keep growth alive. The next several weeks of data releases (starting with next week’s employment report) may tell us which outlook is correct.

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N. Korea fires short-range missiles into sea, raising doubts for nuclear talks: BBC
US warship sails through Taiwan Strait, raising tension with China: Reuters
Mueller’s testimony disappoints Trump’s critics: Politico
Mueller says Russia still meddling in US elections: CNN
Boris Johnson unveils new cabinet appointments on first day as PM: BBC
Is the ECB preparing to cut rates? MW
New US home sales rebounded sharply in June: CNBC
Europe’s mfg downturn weighs on economic trend in July: IHS Markit
German business sentiment continues to deteriorate in July: Reuters
Has the boom in US auto sales peaked? NY Times
US economic output ticked up in July but remains subdued: IHS Markit

This year’s rally in stocks has left no major region of the world untouched by animal spirits. But the appetite for risk is strongest in Eastern Europe/Russia, closely followed by the United States, based on year-to-date returns via a set of exchange-listed products that represent the main economic regions on the planet.

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China warns that military can be used to contain Hong Kong protests: NY Times
Boris Johnson, Britain’s new prime minister, takes office today: BBC
US-China trade talks will resume next week: WSJ
US Dept of Justice announces antitrust review of Big Tech: CNBC
China says US is undermining global stability: Bloomberg
Robert Mueller scheduled to testify in Congress today: CNN
FBI director: Russia intent on interfering in US elections: Reuters
Eurozone growth remained muted in June, falling to 3-month low: IHS Markit
German mfg sector slumped to worst performance in 7 years in June: IHS Markit
Manufacturing is contracting in the mid-Atlantic states for July: Richmond Fed
US existing home sales fell in June and continued to slide in annual terms: MW

The government’s preliminary estimate of gross domestic product for the second quarter, scheduled for release on Friday (July 26), is expected to reveal a substantial downshift in US economic growth, based on a set of nowcasts compiled by The Capital Spectator. Although output will be strong enough to skirt a recession through the end of June, the downshift comes at a time of rising concern that the economy’s forward momentum will continue to decelerate in this year’s second half.

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Trump and Congress agree on deal to raise debt, spending caps: Reuters
Bigger deficits look set to be legacy of Trump era: Politico
Trump administration considers ending food stamps for 3 million: Bloomberg
Presidential hopeful Elizabeth Warren predicts “economic crash”: Medium
Does Warren’s dire forecast pass the smell test?: CNBC
UK set to select new prime minister today: BBC
S. Korean fighter jets fired warning shots at Russian military aircraft: CNN
N. Korea’s Kim inspects new submarine that may carry missiles: NY Times
US economic growth remained subdued in June: Chicago Fed

Bonds in emerging and non-US developed markets topped last week’s performance profile for the major asset classes, based on a set of exchange-traded funds. By contrast, broadly defined commodities tumbled, suffering the deepest weekly setback in nearly two months for the trading week through Friday, July 19.

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Hong Kong protests escalate into violent clashes with police: AP
UK Prime Minister May will chair emergency meeting on Iran today: BBC
Are tariffs and rate cuts the only solution to US-China trade war? CNBC
US Commerce Dept reportedly suffering from extreme dysfunction: Politico
British pound sank to 2-year low last week on Brexit fears: NY Times
China’s new tech-stock platform is a hit: WSJ
Goldman: US stock market trading near fair value: Bloomberg
US Consumer Sentiment Index ticks up in July, near 15-year peak: MW

● The Fifth Domain: Defending Our Country, Our Companies, and Ourselves in the Age of Cyber Threats
By Richard A. Clarke and Robert K. Knake
Review via Mother Jones
In 2004, as he sat before the commission investigating the 9/11 attacks, Richard Clarke famously declared, “Your government failed you, those entrusted with protecting you failed you, and I failed you,” before asking for understanding and forgiveness. Clarke, a former senior government counterterrorism official, told the world that before the terrorist attacks, President George W. Bush’s team had ignored his efforts to get the administration to address the threat posed by Al Qaeda. (White House officials vehemently denied this charge.)
These days, Clarke is focused on another threat that the US government has been slow to confront: the vulnerability of the country’s computer networks.
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In a year when every corner of the US stock market is rising, it’s no mean feat to leave the crowd in the dust. Yet that describes the run in technology shares in 2019, the best-performing equity sector by far year to date, based on a set of exchange-traded funds.

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