Buckle up: GM, Michigan and 2020

Welcome back to Axios Business. Here's a situational awareness:

• Visa, Mastercard and other financial partners that signed on to help build Facebook's Libra payments network are reconsidering their involvement after a backlash from government officials.
• J&J reached a $20.4 million settlement with 2 Ohio counties ahead of the opioid trial scheduled to start later this month.

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1 big thing: One year after Jamal Khashoggi's murder, nothing has really changed for corporate America

By: Dan Primack ? Newsletter: Axios Pro Rata

Illustration: Sarah Grillo/Axios

One year ago today, journalist Jamal Khashoggi walked into the Saudi consulate in Istanbul. He was then beaten, tortured, murdered, and dismembered.

Why it matters: Both politically and for most of corporate America, nothing has really changed in the last year — despite initial promises and action.

On the political side, President Trump pledged "to get to the bottom of it," and Secretary of State Mike Pompeo promised to "hold all of those responsible accountable."

• Neither of those things happened. Nor has the White House publicly affirmed an 11 month-old CIA assessment that Saudi Crown Prince Mohammed bin Salman (MBS) ordered the assassination.

Corporate America, on the other hand, seemed at least willing to publicly shame MBS.

• Dozens of top Wall Street and business executives canceled plans to attend a massive investment conference in Riyadh, nicknamed "Davos in the Desert" and hosted by MBS.
• Among them were BlackRock CEO Larry Fink, Blackstone CEO Steve Schwarzman, JPMorgan CEO Jamie Dimon, venture capitalist Steve Case, Uber CEO Dara Khosrowshahi, and World Bank president Jim Yong Kim.
• All of the event's media sponsors also bailed, including both CNBC and Fox Business Channel.

But apparently a year heals all wounds.

• MBS is once again hosting his prized event, beginning on October 29, and he wouldn't have risked a repeat embarrassment.
• BlackRock's Larry Fink is attending this time. Citigroup CEO Michael Corbat is also on the list, per The Washington Post. SoftBank simply isn't commenting on whether or not its CEO will be there.
• The White House also will send a delegation, led by Jared Kushner. Last year, Treasury Secretary Steven Mnuchin canceled, but then attended an anti-terrorism financing event that was expected to "include participation by Saudi security services under scrutiny in Khashoggi’s death."

The big picture: Most of these big companies never stopped doing business with the Saudis. Or, in the case of Wall Street, trying to get Saudi business. That's particularly true when it comes to deals like the upcoming Aramco IPO, which could be the largest global float of all time.

• As we wrote at the time: It's much easier to bail on a conference than it is to unwind complex and lucrative business relationships.

The bottom line: MBS bet that Trump didn't care and that CEOs didn't care enough. He was right.

Go deeper: A year after Jamal Khashoggi's murder, Saudi trial veiled in secrecy

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2. The bears are in control now

By: Dion Rabouin ? Newsletter: Axios Markets  

Illustration: A?da 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.

Why it matters: But with the S&P 500 approaching 20% gains for the year and no real signs of growth to be found, a spirit of pessimism and increased caution looks to be gripping the market.

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.

• The trade war is having a clear impact on not just manufacturing, but business and consumer confidence as well as capital expenditures and investment.
• Data shows countries around the globe are seeing slowing GDP growth, with some going into reverse, including in Germany and the U.K., 2 of the world's 5 largest economies.
• Extremely loose global central bank policy is failing to offset the negative impacts of slowing trade, growing uncertainty and weakening population demographics.

What they're saying:

• "The disappointing data is only fanning long-standing fears of slowing global growth," Alec Young, managing director of global markets research at FTSE Russell, wrote in a note to clients.
• "And with U.S.-China trade expected to produce little in the way of near-term breakthroughs, investors continue to favor countercyclical, defensive stocks with high dividend yields as weak data pushes interest rates ever lower," Young said.
• “Fed rate cuts are not likely to fuel equities higher as they did in the 1990s,” UBS equity strategist Francois Trahan said in a note.
• “The Fed-easing rallies of the 1990s were made possible by a strong inverse correlation between interest rates and [price-to-earnings ratios]. This relationship no longer exists today,” Trahan added.

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.

• Third quarter corporate earnings are expected to be negative for the second quarter in a row and likely will slump again in the fourth, analysts say.

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.

Go deeper: An inflection point for the market

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3. Buckle up: GM, Michigan and 2020

By: Joann Muller ? Newsletter: Axios Autonomous Vehicles

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.

• "If the strikes goes on, the economic ripples will threaten Trump’s presidency," says Anderson Economic Group CEO Patrick Anderson, who has been studying the effect of local pocketbook issues on national elections since 2004.

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 faced their first payday without a check last Friday, but $250 in weekly strike benefits kicked in this week.
• Employees at some supplier companies as well as GM plants in Canada and Mexico have been laid off due to parts shortages.
• GM is losing an estimated $25 million a day, and $113 million in profits to date.

"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

Go deeper: Catch up fast on the General Motors strike

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