The term “geopolitics” has a specific meaning, though in the context of assessing markets and their equally ubiquitous though purposefully non-specific “jitters”, it’s basically a catch-all, too. Should the stock market, in particular, take a bad step, reflexive commentary is quick to call up geopolitics.

Such was absolutely the case late in January 2018 into the following month of February. Stocks were down. Kim Jung Un was firing missiles. Crazy-man Trump in all the Western media. These things were purportedly raising the global temperature to the point that it was in danger of becoming a flashpoint. Therefore, it sounded plausible (I guess) even stocks would pause their (latest) epic rise if to reassess these dangers.

There was even some absurd fuss about the imminent launch of World War III.

And if not geopolitics, of course, there’s always the Fed. If you didn’t think there was much to Korean weapons tests, and there wasn’t, then it must have been Janet Yellen’s hawkish successor Jay Powell to worry about once February 2018 began. After all, across all the news was this idea that good news was bad news; the better the US economy was doing, the more hawkish Powell would evolve in his first months and year in office.

One of my favorites:

“Economic news from the US has been stronger than anticipated,” said David Kuo, chief executive of financial services advisory Motley Fool. “So, perversely, the market correction has been caused by positive economic news”.

Markets worldwide suffer most when the most fundamental parts of them are doing their utmost best? Only if you think the Federal Reserve is the source of all life and energy.

The problem with these views is that they begin from an unchallenged assumption (taken from the other one that the Federal Reserve is the source of all life and energy).

We are taught from the start to believe that the economy is either in recession or booming. And if not the former, it can only be the latter. So, should markets tinge with uncertainty outside of any declared trough to the business cycle, our list of approved causation is inappropriately too limited (this assumption had actually been the mainstream view throughout the first half of 2008).

Must be “geopolitics”, then. Which one? Doesn’t matter. Pick one. There’s always something bad and the possibility for worse going on in the world.

Start with the unearned certainty on growth and inflation pressures, account for only temporary factors as necessary, leaving hunky dory sunshine never more than a news cycle away. The underlying suggestion is that the baseline is robust if not too much; thus, resolve today’s issue-of-the-day and we go right back to sunshine as if nothing happened.

See? Nothing to really worry about.

As it would turn out, neither the Fed’s rate hikes nor North Korea’s tempestuousness had anything to do with 2018 going the wrong way even though what did go wrong did end up with 2019 as a total economic, not geopolitical, mess. The underlying guess of a booming economy, globally synchronized growth, that is what was actually being questioned (flat curves especially) right from January 2018.

With very good reason, though more Japan than Korea.



This is not to downplay the high stakes and seriousness of various problems across the globe, including right now January 2022 in Ukraine and Communist arms surrounding Taiwan.

How about a growth scare that more and more seems, perhaps, not a scare? It’s the one possibility we’re never meant to ponder even for a moment.

Tracking PMI data on that account, the last half of last year had left a very clear downside trend that with the initial sentiment data for 2022 indicates at best its continuation or maybe an acceleration further downward to it.

Last week, I highlighted the Federal Reserve’s New York branch and its Empire Manufacturing survey which, frankly, collapsed in January. Dropping by more than thirty points in its headline index along with the same level for new orders, though just one month for one survey I thought it worth mentioning anyway.


The conventional explanation has been – while markets supposedly get more jittery from geopolitics – the pandemic, specifically omicron. It’s a plausible explanation, after all, New York being at the epicenter of the new variant’s seasonal uptick.

Very close to New York, however, the Fed’s Philadelphia branch rebounded in January from its own plunge during December. In this other one, the overall manufacturing estimate tumbled almost 25 pts last month, with the index for new orders giving up nearly 35. This month, the topline number recovered but only eight pts while new orders increased by barely more than four.


We’ve had our eyes on new orders specifically for matters unrelated to massed armies or even government pandemic overreactions. The vast and vastly obscured inventory cycle, however, and the potential for, again, a material slowdown keeps showing up in the data – and not just that for sentiment, nor for just the US.

Earlier today, IHS Markit marked down its own manufacturing numbers for the whole US economy. At a flash January reading of 55.0, that’s down from 57.8 in December, noticeably distant from July’s 63.8, and very clearly having gone decidedly in the wrong direction ever since.



On the services side of its ledger, Markit released some shocking data in the form of a major decline for the non-manufacturing PMI. This one crashed from 57.0 in December down to just barely 50 (50.8) the flash for January. That’s nearly four points less than the previous cycle low, September 2021, which, of course, had been immediately blamed entirely on delta.

Governments in the US were clearly provoked substantially more, and in substantially more places, by delta than have been due to omicron. So, while we might consider the latter as having had some negative impact maybe concentrated in a short timeframe like December or January figures, it sure doesn’t explain the overall trend and where things seem to be headed regardless of these transitory interruptions.

Lower highs, lower lows.

Furthermore, new orders. What IHS Markit had to say about them (both services and manufacturing) in its January data was one part spin, a bigger part uh oh:

New orders for goods and services continued to rise strongly, albeit registering the weakest rise since December 2020. The upturn in new orders was supported by the service sector, as manufacturers stated that new sales growth was often held back by weaker demand from clients amid price rises and efforts to work through inventories. [emphasis added]

A strong rise in orders that’s also the worst in thirteen months, technically true, sure, meaningless nonetheless though standard stuff which begins with the binary assumption I stated from the outset (if it isn’t recession, must be great). More important was that last bit: “efforts to work through inventories.”

That this is something new in the commentary is itself a substantial shift.


In other words, we know in bonds almost for certain what’s been keeping a lid on growth and inflation expectations for long-term yields going back almost a year now, even as the Fed’s rate hikes are incorporated into them, and it hasn’t been geopolitics nor particular strains of pandemic interruptions.

There’s been two of those over the preceding year and the growth scare just won’t go away; it sticks around in a way that neither “geopolitics” or coronavirus strains has nor is really meant to.

We’re never supposed to question the boom when that’s usually the first place to start.

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