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The two major risk factors in markets for 2019 will still be there in 2020

US-China trade and Brexit worries will not go away despite some improvement in their respective rhetoric at the moment

We’re getting closer to a Phase One trade deal and Boris Johnson just won big in the UK election last week. Two of the biggest risk factors that has plagued markets this year appear to be finding some form of conclusion, but are they really?

US-China trade war

US-China
As great as the Phase One trade deal is and will be, it isn’t the “be all, end all” deal that will see US-China relations significantly improve.
This is merely a temporary ceasefire at best and at worst, it’s just a delusion to keep some hope that both sides are not yet ready to engage in a full-blown trade and geopolitical war.
The Phase One deal will include tariffs rollback by the US in exchange for China purchasing more farm products – to try and reach $40 to $50 billion annually – as well as some “firm” commitments on technology transfer, currency and opening up of its economy.
The catch here is that it will include some subjective way of determining how both sides will live up to their respective end of the deal. That tells me that ultimately, this will eventually lead to either one of them calling the other out when the time is right.
As such, don’t expect the hostilities and trade worries to die down just because the Phase One deal has been signed – if it even does that is. This is a worry that will haunt markets for many more years to come and 2019 is but a taste of what it can be like.

Brexit

Boris Brexit
Boris Johnson got his much sought after majority in parliament – quite comfortably as a matter of fact – and now he can get his Brexit deal across the finish line. Easy-peasy.
Sadly, this is just merely the starting point in the whole Brexit process.
Once Johnson gets his deal through the legislative hurdles in parliament in January next year, he will have to then go on to negotiate a future trade relationship with the EU.
And for the uninformed, they will only have until the end of next year to finalise a deal and to try and implement it thereafter. Otherwise, the UK will leave the EU without a deal.
Yes, a no-deal Brexit is still on the table as long as the UK and EU cannot agree to a trade deal during the transition period next year.
That can still be avoided though if the UK requests an extension to the transition period before July next year. However, Johnson has categorically ruled that out repeatedly over the past two months in what looks to be a gambit to pressure EU leaders during talks.
We’ll see how all of that plays out but it is clear as day that both sides won’t get a deal done before 31 December 2020. That is all but a pipe dream.
As such, we will have to see if Johnson will find it sensible to negotiate further in the coming years – prolonging the Brexit uncertainty – or opt to crash out of the EU without a deal, wasting all the time we have spent extending the Brexit deadline since March.

People Who Make The Minimum Wage Need To Work 127 Hours A Week To Afford Two-Bedroom Apartment

The federal minimum wage of $7.25 has not risen in a decade. The price of most essentials like housing, clothing, and food has. As a measure of how little the minimum wage covers when gauged against a yardstick of housing costs nationally, people whose incomes are at the minimum level would have to work 127 hours week, every week,  to afford a two-bedroom apartment.

New research by the National Low Income Housing Coalition measured housing costs against the minimum wage in all 50 states, and several large cities. The current survey is the 30th annual installment of the analysis.

The report is unusually comprehensive and runs 285 pages. It shows that the pool of low-income housing in the U.S. is shrinking. Its authors note that to afford a two-income apartment based on the national average rent means people would need to work three full-time jobs at the minimum wage. The stark bottom line conclusion of the report is that “In no state, metropolitan area, or county in the U.S. can a worker earning the federal or prevailing state minimum wage afford a modest two-bedroom rental home at fair market rent by working a standard 40-hour work week.”

Renters with the lowest wages in America range from 20% of Black households to 16% of Hispanic households, to 6% of Whites.  The difference in racial makeup, the researcher report is “because of historical and persisting wage disparities and barriers to homeownership.”

The ability for minimum wage workers to afford two-apartment rental costs varies sharply by state and city. The states where the ratios are most disadvantageous are Hawaii, where a family would need to make $36.82 an hour to afford an apartment that size and New York were the figure is $34.69 to, at the low end, Arkansas at $14.26 and West Virginia at $14.27. Even at the low end, the affordability of rent against a $7.25 wage is stark.

In several cities, the figures are much worse for low-income renters. In San Francisco, a family would need to make $60.96 an hour. In nearly San Jose, the number is $54.60. The two cities are at the very top of most lists in terms of housing expenses. Several of the zip codes in these cities are among the most expensive zip codes in the U.S. 

The conclusion of the reports is depressing. “Low wages, wage inequality, racial inequities and a severe shortage of affordable rental homes leave too many vulnerable people unable to afford their housing” And, all of the data in the report show that the trend worsens year after years.