by Bill O’Grady and Thomas Wash

[Posted: 9:30 AM EDT] It was a busy weekend.  Here are the stories we are following:

Merkel slips: Merkel’s CDU/CSU won the election as expected, but underperformed expectations.  Her party took 32.9% of the votes compared to the last poll predicting a result of 34%.  However, most polls going into last week had her party at 36%, indicating a disappointing outcome.

The mainstream parties took a beating.  The Social Democrats lost votes to all the fringe parties, while most of the Conservatives (CDU/CSU) lost to the Free Democrats (FDP), libertarian, and the Alliance for Germany (AfD), populist-right.  Also note on the chart below that the AfD and the FDP took a large number of non-voters.  Populists are pulling disaffected voters into the polling booths as they now believe they have a choice.

The SPD has indicated it won’t join a coalition with Merkel again so the Chancellor will need to put together a government with the FDP and the Greens (the so-called “Jamaica option,” reflecting the flag colors of that island nation).

Because of Germany’s proportional electoral system, the seats in the Bundestag are now up to 709, meaning that a majority government needs 355 seats.  The CDU/CSU and the FDP only make up 326; the Greens are the only other coalition option for Merkel.

The fallout is that this will be a weak government.  Although Merkel’s nuclear power policy and support of green energy will give her some credit with the Greens, the rest of the conservative coalition’s policies will be opposed by the Greens.  The FDP generally opposes the Euro project which will undermine Merkel’s support because much of her own party is becoming increasingly Euro skeptical.  Thus, governing is going to require all of Merkel’s formidable political skills.   We would not expect a government to be officially formed until December.

The market impact is interesting.  German Bunds rallied, helping U.S. Treasuries to lift.  The EUR fell.  The German elections show what we are seeing across the rest of the West.  The center-left and center-right parties are losing support to the political extremes.  Everywhere, voters are pressing for something new.  We note over the weekend that the NYT carried a story about the growing strength of Jeremy Corbyn, who is dragging the British Labour Party to the extreme left.[1]  The continued surge of both right- and left-wing populism is a threat to the stability of financial markets.  In related U.K. news, Moody’s downgraded the U.K. to Aa2 from Aa1 due to Brexit and uncertainty about Britain’s debt reduction plans.

Japanese snap elections: Ending weeks of speculation, PM Abe will dissolve parliament on Thursday with elections mostly likely to be held on October 22.  Current polling puts Abe’s LDP well in the lead, with 44% support from voters and most of the opposition parties holding under 10%.  However, polls also report a high level of undecided voters, which carries its own dangers.   Abe is calling for increased fiscal stimulus (a usual election ploy) and a hike in the consumption tax to 10% from 8%, with the additional funding for daycare in a bid to boost birthrates.  We don’t expect Abe to lose but caution is warranted given the large number of election surprises over the past year.

Kurds vote: Iraqi Kurds are expected to vote to leave Iraq today.  Although Kurdish leaders have indicated they will press for secession within 48 hours of a vote to leave, we actually expect a long and drawn-out process.  Most of the Kurdish region’s neighbors oppose statehood and the Kurds themselves are bitterly divided between the more conservative Iraqi Kurds and the Marxist-leaning Kurds in Syria and Turkey.  Still, this vote exemplifies a risk that President Bush ignored when he invaded Iraq 14 years ago; Iraq was more of a construct than a country and democracy would likely lead to division.  Currently, Iraq is divided between Kurds, Sunnis who, for a time, flirted with IS, and Shiites, aligned with Iran.

Catalonia moves toward a referendum: PM Rajoy has declared the independence referendum, set for October 1, illegal and has arrested several Catalan independence leaders.  Thousands protested in Catalonia over the weekend, calling for the vote to proceed.  Rajoy probably overstepped by arresting leaders; polls suggest that support for independence is less than 50% and the referendum would likely fail on its own.  The PM’s harsh tactics may lead to more support for independence than would have otherwise occurred.

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[1] https://www.nytimes.com/2017/09/23/world/europe/jeremy-corbyn-labour-conference.html?emc=edit_mbe_20170925&nl=morning-briefing-europe&nlid=5677267&te=1

by Bill O’Grady and Thomas Wash

[Posted: 9:30 AM EDT] There is much to discuss this morning.  Let’s get to it:

North Korea returns: After President Trump’s speech to the UN we have been waiting for a response from the Kim regime.  Overnight, we got our answer.  The Young Marshal offered a rambling response to Trump but, more importantly, suggested he is considering a thermonuclear test in the waters of the Pacific Ocean.  Non-underground testing of nuclear devices has become rare; the last one we could find was by China in 1980.  Underwater testing was usually done to evaluate the impact on naval vessels; if the test occurs near the surface it can disperse significant amounts of nuclear fallout in the water and create radioactive steam.  However, contamination is generally limited to the area around the blast.  Still, such a test would be a major escalation of tensions.  If the underwater test is a device offshore tethered to a barge (the usual method), it’s a problem but not a red line.  On the other hand, if the test is a warhead on a missile that is launched into the ocean and detonated, that would likely cross a red line and bring a military response from the U.S.  The Trump administration has unveiled new financial sanctions that could potentially raise pressure on Chinese financial entities dealing with North Korea.

There is no doubt that tensions are escalating and the bellicose rhetoric is pushing both leaders into corners that will be difficult to walk back from without losing face.  So far, financial markets are taking the news in stride.  As we have seen recently, most of the impact has been in the forex markets; the dollar has declined,[1] Treasuries are modestly higher and equities are mixed.  Although financial markets are concerned, there has been no discounting for war.  If a conflict does break out, we would expect a much larger downturn in equities; the duration and depth would be dependent upon the level of intensity and the outcome of a conflict.

German elections: Germans go to the polls on Sunday.  Current polling strongly suggests that Chancellor Merkel will remain in her role after the elections.  The latest polls show Merkel’s CDU/CSU holding a comfortable 14.5% lead over her nearest competitor, the Social Democrats (SPD).  There are two unknowns in this election.  First, Merkel will almost certainly need a coalition partner.  The current government is a “grand coalition” of the CDU/CSU and the SPD.  If the Free Democrats (FDP), a more libertarian party, get enough seats, you might see a CDU/CSU and FDP government.  This has been a traditional alignment in Germany.  A CDU/CSU and FDP coalition would probably take a harder line on the Eurozone issue as the FDP is much less enamored with the EU and the Eurozone.  Currently, polling suggests another grand coalition, meaning the status quo continues.  The second issue is the rise of the AfD, which is a right-wing populist party.  It is polling close to 11%, meaning it will almost certainly gain representation in the Bundestag.  No other party plans to join the AfD but its presence in the legislature will be a jarring development and highlights that, even in Germany, populism is gaining strength.

Kurdish referendum: On Monday, Iraqi Kurds are planning to hold a referendum on independence.  The Iraqi government, the U.S., Iran and Turkey all oppose the move.[2]  However, on the ground, the situation is more complicated.  First, the Kurds themselves are not unified.  The Syrian Kurds have closer relations with the Kurds in Turkey and are not all that close to the Iraqi Kurds.  The Syrian/Turkish Kurds are aligned with a leftist (neo-Marxist) movement of the Kurdistan Workers Party (PKK).  The Turkish government is much more concerned about a Kurdish state in Syria because it would have common cause with the Kurds in Turkey.  On the other hand, the Iraqi Kurds have been useful to Turkey.  A Kurdish state in Iraq would be deeply dependent on Turkey—oil pipelines from the Kurdish region transverse Turkey.  About 90% of Iraqi Kurdistan’s revenue comes from oil.  In addition, a Kurdish state split from Iraq narrows the “Shiite Crescent” that gives Iran influence from Tehran to Lebanon and reduces Iraq significantly.  Turkey isn’t comfortable with a Kurdish state on its border but it could be useful.  We expect the referendum to go forward and the vote to clearly favor independence.  From there, the negotiations begin.

May speaks in Florence: PM May is giving a speech in Florence today.  There is great anticipation over her comments because progress on Brexit has been slow and the clock is running.  She is expected to allow the EU and the U.K. to split in about 18 months, but it is thought that she will ask for a two-year transition period to prevent a “regulatory cliff” and chaos.  We doubt the EU will comply with her wishes; the EU wants to raise fears among others that leaving the EU is dangerous and costly.  The downside for the EU is that hurting the U.K. will harm the EU as well.  Moreover, the U.K. is arguably[3] the most competent military in Europe and NATO could become a less impressive force without full participation from the U.K. military.

The flow of funds: Yesterday, the Federal Reserve released the Financial Accounts of the U.S., which was formally known as the “flow of funds” report.  It is a rich report with lots of interesting information.  We will have more to detail on this report in an upcoming Asset Allocation Weekly, but one chart we will show today is household net worth as a percentage of after-tax income.  As shown on the chart below, net worth has hit another new record, a reflection of elevated asset prices.  As the history shows, elevated levels are followed by corrections, mostly due to weaker equity markets.  Note that declines in the level of household net worth are closely tied to recessions.  At this juncture, none of our recession indicators are suggesting that a recession is imminent.  Thus, the chart confirms equity markets are elevated, but nothing more.

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[1] One question we have been getting recently is, “Why is the JPY a flight to safety currency?”  It’s a good question.  The best answer is that Japan, due to years of current account surpluses, has significant levels of overseas investments.  When crises hit, Japanese investors pull some of their money home, causing a rally in the JPY.

[2] The only regional power showing unabashed support is Israel.

[3] The French military is considered a close second.

by Bill O’Grady and Thomas Wash

[Posted: 9:30 AM EDT] Financial markets are consolidating after yesterday’s Fed meeting, which we will discuss below.  The key takeaway is the dollar’s rally.  In the Asset Allocation Weekly published on Friday (see gray section below), we analyzed the case for a weaker dollar; it rests on the fact that the dollar is already overvalued as the currency markets discounted tighter Fed policy much earlier than other markets.  Still, it appears the Fed’s decisions yesterday did stall the dollar’s recent weakness.  Here is what we are following this morning:

Fed recap: The financial markets took a hawkish tone to the FOMC decision.  Market expectations had been for a tradeoff of balance sheet reduction in place of rate hikes.  In other words, Chair Yellen would placate the hawks on the committee by reducing the balance sheet instead.  However, that isn’t what was offered.  Instead, the FOMC has mostly maintained its plan to raise rates.

Yesterday’s average estimates are shown in the large light blue dots.  The forecasts from the FOMC members are mostly consistent with June.  In fact, they are a bit dovish in the out years.  However, market expectations had been shifting to no change in rates this year.  That estimation shifted sharply in light of the FOMC report.  Looking at the chart below, the black line shows the probability of a hike from fed funds futures relative to no change, shown in blue.  Note that expectations of a hike rose initially after the last meeting then steadily edged lower.  We have been seeing a steady shift in expectations toward a hike since early September and it jumped to over 67% in light of yesterday’s comments.  We will see if the June/September pattern repeats itself, or if the expectations hold for a hike in December.

The other issue worth noting is that inflation expectations haven’t changed.  The FOMC is still projecting a core PCE of nearly 2.0% by 2019 and throughout the rest of the forecast period.  Current core PCE is 1.4%.  The projected rate hikes with 2% inflation will bring the real rate to zero by the end of next year and positive thereafter.  However, if core PCE does not increase as expected and rates continue to rise, the projected rate of real fed funds will turn quite positive.  The red line on the chart below shows the projected path of real fed funds using the FOMC assumptions.  Usually an upward move of 400 bps from the low in the cycle triggers a recession.  Given that the low was established in early 2012 at near -2.0%, the projected path would put us dangerously close to recession territory.  Of course, the FOMC’s projection of inflation may end up being correct and the red line is too high by 40 bps; if that occurs, the concern is lessened.  However, we have little confidence that the Fed’s projections of inflation will be right as the track record is less than stellar.

An additional concern is the balance sheet shrinkage.  Although the jury remains out as to the actual impact of QE, the risks of a policy mistake rise if reducing the balance sheet ends up having the effect of tightening policy.  As we have seen in the above dots chart, promising is one thing—doing is another.  The FOMC may not tighten as much as expected; in fact, in 2014, the terminal rate was expected to reach 4%.  That expectation has clearly changed.  But, based on what we saw yesterday, the path of policy tightening still appears to be on track.

Other central banks demur: Reserve Bank of Australia (RBA) Governor Lowe indicated that his central bank is not necessarily prepared to follow the Fed in raising rates.  BOJ Governor Kuroda indicated the same thing.  In general, we have seen veiled “beggar thy neighbor” currency policies throughout the world since 2008.  Although no central banker wants to directly say his/her nation is deliberately trying to weaken a nation’s currency, they also don’t seem to welcome depreciation.  In light of recent dollar weakness, it appears that other central bankers are likely to avoid the hint of hawkishness that would prevent their currencies from weakening.  In later parts of Lowe’s comments, he did warn that rates would need to rise, but that sentiment was lost when he indicated a tightening Fed wouldn’t necessarily trigger tightening from the RBA.

China downgraded: S&P downgraded China’s sovereign debt to A+ from AA-, five months after Moody’s cut China’s rating to A1 from Aa3.  Both cited high debt levels for the downgrades and changed their outlooks to stable after the adjustments.  In reality, China’s sovereign debt is not widely held outside of China so this downgrade won’t mean anything significant to interest rates.  Nevertheless, the downgrade does come at an inopportune time for General Secretary Xi with the CPC Congress next month.

SEC hacked: The SEC reported that its EDGAR reporting system was hacked last year and information gained may have been used for insider trading.  Essentially, hackers would have gotten advance information of official filings before the public, which would have been quite valuable.

South Korea at odds: President Trump, PM Abe and South Korean President Moon are expected to meet on the sidelines at the UN General Assembly this week.  Trump and Abe have been pressing for military action against North Korea.  Moon does not want this to happen.  Essentially, Moon fears that South Korea would face the brunt of a retaliatory attack from North Korea if the U.S. tries to militarily neutralize Kim’s nuclear and missile program.  Moon is probably correct.  North Korea has massed artillery along the 38° parallel and would likely strike Seoul with a devastating conventional barrage.  Worse yet, North Korea has a large arsenal of chemical weapons that would cause massive casualties.  Thus, South Korea is more willing to live with a nuclear-armed North Korea and wants its own nuclear weapons to act as a deterrent.  This solution is much less attractive to the U.S. and Japan.  The latter two are not threatened by North Korea’s conventional forces but are at risk to nuclear weapons on missiles.  We don’t know to what lengths Moon would go to prevent an American attack on Pyongyang; would he not allow U.S. troops in South Korea to engage in a conflict, or close South Korean airspace and sea boundaries to U.S. military assets?  It is hard to see how the U.S. could conduct effective operations against the North without South Korean cooperation.  At the same time, it is hard to see how President Trump would stand down and not protect the U.S. from a rogue nuclear power just because South Korea objects.  We note the White House has announced the president will make a statement on North Korea this afternoon.  We will await his comments.

Energy recap: U.S. crude oil inventories rose 4.6 mb compared to market expectations of a 3.0 mb increase.

This chart shows current crude oil inventories, both over the long term and the last decade.  We have added the estimated level of lease stocks to maintain the consistency of the data.  As the chart shows, inventories remain historically high but have declined.  Hurricane Harvey affected the energy market data again this week; the effects should continue for several more weeks.

As the seasonal chart below shows, inventories did turn higher again this week, affected by the aforementioned hurricane.  We have started the inventory rebuild period sooner than normal this year.  Oil imports continue to recover, rising 0.7 mbpd, and domestic oil production rose by 0.157 mbpd, adding supply to the market.  However, refinery capacity utilization jumped 5.5% to 83.2%, an increase in consumption of 1.0 mbpd.  If this refinery recovery continues, the rapid increase in oil stockpiles should begin to dissipate.

Based on inventories alone, oil prices are undervalued with the fair value price of $50.02.  Meanwhile, the EUR/WTI model generates a fair value of $67.10.  Together (which is a more sound methodology), fair value is $61.30, meaning that current prices are well below fair value.  If the Fed does continue to tighten policy and the dollar recovers, it will tend to undermine oil prices, although we would note that oil has been underperforming the dollar’s weakness.  Thus, the adverse impact of a stronger dollar on oil should not be material.

OPEC meets: The cartel is scheduled to meet tomorrow and is considering extending production cuts well into next year.  Saudi Arabia has already announced it will delay its IPO of Saudi Aramco until 2019, likely because low oil prices will reduce the valuation of the company.  We expect the cartel to extend cuts, but would also anticipate less compliance as time passes.

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by Bill O’Grady and Thomas Wash

[Posted: 9:30 AM EDT] Markets are very quiet in front of the FOMC meeting.  We get the results later today at 2:00 EDT, with a press conference about 30 minutes later.  Here is what we are watching:

The UN speech: On the surface, the president’s speech at the UN was more bellicose than we expected.  The populist right was giddy; the centrist establishment was horrified.  However, below the surface, we saw the speech as pure Andrew Jackson.  As we have discussed before,[1] Jacksonian foreign policy rejects the globalist vision of policy, be it for the sake of business (Hamiltonian) or spreading American values (Wilsonian).  Instead, it is based on supporting American sovereignty and supporting American interests first.  At the same time, it is heavily invested in honor—the U.S. supports its allies but will react with overwhelming force against threats.  Jacksonians reject the concept of limited war.  This model of foreign policy, along with its more isolationist model, Jeffersonian policy, disappeared during the Cold War.  It is clear the administration views North Korea and Iran as significant enemies.  On the other hand, it seems willing to give more room to China and Russia.  Although we expected a less aggressive speech, the content was no surprise.  Thus, the potential for conflict in North Korea is elevated but, as we have noted before, there are no mobilization actions that one would expect if a conflict is imminent.

The Fed: Expectations are high for a beginning to the balance sheet runoff.  We expect the Fed to stop reinvesting when bonds mature, initially allowing $5 bn per month to exit the balance sheet and eventually raising this to $50 bn.  The dots plot will be of particular interest.  Currently, fed funds futures put the odds of a December hike at virtually 50%.  Thus, if the dots suggest the next rate hike isn’t coming until 2018, we could see some dollar weakness develop.  This topic will likely be addressed in the press conference if it isn’t clear in the dots, which could lead to some volatility later in the day.

Another Russian bank in trouble: B&N Bank, one of the top five lenders in Russia, is reportedly in trouble and may need a bailout.  This would be the second major bank in Russia in the past few months to require nationalization.  Earlier, the Bank of Russia bailed out Bank Otkritie.  To some extent, both banks have gotten into trouble by purchasing dodgy loans in smaller banks that were closed by the financial authorities.  What is going on in Russia looks much like the Savings and Loan Crisis in the U.S. in the 1980s.  The Bank of Russia is trying to consolidate the banking system and is encouraging larger banks to buy the smaller ones.  However, the small banks apparently were in more trouble than they thought.  We don’t expect these bank failures to become systemic; instead, the Bank of Russia will simply nationalize these bad banks.  The risk comes from the potential for a forced expansion of the money supply, which would lead to higher inflation.

Catalan independence vote: The WSJ reports that the Spanish police have arrested 13 officials associated with the planned October 1st referendum for Catalonia secession.  The Spanish government has stated that the referendum is illegal and has vowed to stop it by any means necessary.  The government’s decision to crack down on officials will likely bolster support for the referendum within Catalonia.  So far, the EU has refrained from intervening, apparently viewing it as an internal Spanish matter.  However, the referendum can also be framed as a human rights issue and the EU’s failure to mitigate the tensions between the Spanish government and Catalonia could possibly undermine its reputation as a defender of human rights.  If the problem festers, it could have a bearish effect on the EUR.

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[1] See WGR, 4/4/2016, The Archetypes of American Foreign Policy: A Reprise.

by Bill O’Grady and Thomas Wash

[Posted: 9:30 AM EDT] Markets are very quiet in front of the FOMC meeting, which begins later this morning.  President Trump offers formal remarks to the UN this morning, too.  Here is what we are watching:

The Fed: As we noted yesterday, we look for the Fed to begin balance sheet reduction after this meeting with no change in the policy rate.  In general, there is still a chance the FOMC raises rates in December.  We actually doubt that will happen; if the dots chart agrees with our outlook, the dollar could take another leg lower.

Tropical situation: Hurricane Jose will brush Long Island and the northeastern shore but will generally spin out to sea.  Hurricane Maria is currently a Category 5 storm; it is expected to weaken modestly to a Category 4 but will slam the U.S. Virgin Islands and Puerto Rico then veer northward.  The consensus of computer models have it moving almost due north by the weekend, sparing Florida and probably most of the U.S. mainland.  Of course, conditions can change but missing the U.S. Atlantic coast is favorable news.  Sadly, the Caribbean islands, many of them still reeling from Hurricane Irma, are set for a second hit that will severely set back recovery efforts.

North Korea: This week’s WGR, published yesterday afternoon, recaps the North Korean situation.  SOD Mattis told Reuters today that the U.S. has military options that might spare Seoul from an artillery barrage but gave no details.  Although it isn’t obvious to us just what such options might entail, as we noted yesterday, there is no evidence of U.S. mobilization that would be expected to precede military action.  Thus, for now, financial markets are mostly ignoring North Korea.

Bitcoin: We continue to monitor the cryptocurrency market.  Currently, the behavior seems more akin to gold than a currency.  For the most part, a currency fulfills three roles—store of value, a numeraire and a medium of exchange.  Gold and cryptocurrencies meet only one of these roles, the store of value.  There is limited ability to use either for exchange or pricing things (the numeraire function) because of the volatility.  The chart below shows the recent price behavior of bitcoin against the dollar.  As a thought experiment, imagine that one borrowed in bitcoin in early January when it was trading around $1k.  Your debt service costs have soared ever since.  China is moving to quash bitcoin; it has shut down commercial exchanges and is now acting to inhibit peer-to-peer trading.  We don’t expect the governments and the central banks to allow cryptocurrencies to undermine national currencies.  After all, a currency is a symbol of national sovereignty.  Thus, cryptocurrencies will likely be relegated to black market activities, allowing people to avoid capital controls and make cashless anonymous transactions.

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by Bill O’Grady and Thomas Wash

[Posted: 9:30 AM EDT] It’s Fed week!  The FOMC meets this week, beginning tomorrow and ending on Wednesday.  This meeting will bring new forecasts, dot plots and a press conference.  Here is what we are watching today:

The President to the UN: President Trump will address the UN today.  Although the media is watching this event very closely given the general anti-UN views Trump expressed during the campaign, we would expect a mostly neutral speech, read from a teleprompter.  There is little to be gained politically by making a major negative speech at a venue where most of his political supporters will monitor.  Although anything is possible, we would be very surprised by anything market moving.

The Fed: The consensus outlook is that the FOMC will keep rates steady and begin the process of reducing the balance sheet.  This outcome is already discounted and shouldn’t have a major impact on financial markets.  As we have noted before, most of QE ended up on bank balance sheets as excess reserves.  Thus, removing those reserves shouldn’t have much of an effect on the real economy.  On the other hand, sentiment could be adversely affected; expanding the balance sheet did have a positive effect on equity markets through a higher P/E.  We will be watching to see if removing QE has a symmetric impact.  Our expectation is that it won’t.

War drums: Although the financial markets are becoming inured to events on the Korean Peninsula, comments from Washington are becoming increasingly hostile.  NSC Director McMaster believes that North Korea isn’t stable or rational enough to use nuclear deterrence policy if allowed to develop a fully operational nuclear weapon.  If that is one’s stance, the only rational thing to do is attack before the weapon is fully developed.  The plan appears to be to first lean on China aggressively, pushing Beijing to clamp down hard on the North Korean economy.  The key there is an embargo on oil flows.  If China were to cut off petroleum products to North Korea, the regime’s economy would grind to a halt in about a month.  If this effort fails, military action becomes more likely.  Despite all this war talk, we are not seeing the sort of actions we would expect if an attack was imminent.  There is only one carrier group in close proximity; if a full-scale attack is going to occur, we would expect three groups to participate.  We would also expect evacuations of non-essential Americans in South Korea.  Until these two events occur, we do not see an impending military strike.  We anticipate the financial markets will mostly ignore North Korea (barring an actual military strike from the Hermit Kingdom) until we see a buildup of carrier groups and evacuations.

A tumble in GDP expectations: The Atlanta FRB produces a report called GDPNow that keeps a running estimate for the current quarter’s GDP based on the path of economic reports.  The most recent report shows a rather sizeable dip in Q3 projections.

Estimates of GDP growth, which were running around 3%, have fallen sharply to 2.2%.  Of the 80 bps drop, 52 bps came from a drop in expected consumption, reflecting last week’s weak retail sales data.

The table above shows the contribution to GDP from various components.  The obvious drop in PCE is noted but investment in structures, both business and residential, fell 13 bps.  Inventory rebuilding is expected to add 88 bps, down from 93 bps.  We do think that much of this is coming from the hurricanes, which will drain inventories plus disrupt spending, at least in the short run.  Of course, that will reverse as rebuilding begins.

Hurricane season isn’t over: Hurricane Jose is expected to brush the East Coast before dissipating over cool waters in the central Atlantic.  On the other hand, Hurricane Maria is bearing down on several of the Caribbean islands recently devastated by Hurricane Irma.  Given the level of damage already suffered, it is hard to imagine how recovery can continue if another major storm hits the region.  Current tracking models suggest the path will be similar to Jose, moving north, then west and eventually reaching the northern Atlantic.

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