The Week Ahead – Bourbon & the Trade War

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

Bourbon, the American whiskey. Scents of vanilla, caramel and oak.  I recently had the privilege of attending a charity event featuring a bourbon tasting and learned quite a few things, such as what makes bourbon, bourbon? It really boils down to three main things: it must be produced in the United States, it must be made from at least 51% corn, and it must be aged in new, charred oak barrels. In fact, in 1964, the United States Congress recognized bourbon whiskey as a “distinctive product of the Unite States” and in 2007, the United States Senate passed a resolution officially declaring September to be National Bourbon Heritage Month. Did you also know that various other countries have trade agreements with the United States to recognize bourbon as a “distinctive product of the United States”?

In today’s trade war environment, intellectual property and rights has been the key issue between the United States and other countries. In fact, just this year bourbon purists were outraged when Crown Royal (a Canadian whiskey distiller) produced a batch of whiskey and named it “bourbon mash”. While it checked off two of the three main requirements, it was made in Canada, not the United States. The United States Alcohol and Tobacco Tax and Trade Bureau (TBB) initially approved Crown Royal to use the language “bourbon mash” before realizing their error. Crown Royal quickly pulled the product from shelves, but if you’re lucky enough, you’ll find a rare bottle without a sticker that reads “THIS IS NOT BOURBON WHISKEY”! American bourbon is having a renaissance with production levels surpassing 1.7 million barrels for only the second time since 1968. This surging popularity is being recognized globally as bourbon has become a targeted product in the trade war, with the European Union and China imposing tariffs of 25% and Turkey imposing tariffs of 40%.

The week ahead will be packed with data points. The Fed will release its Beige Book which will provide some insight Into the economic health of the various Fed districts followed by the advanced estimate for third quarter GDP. So far this year, first quarter GDP grew 2.2% and the second quarter saw very robust growth of 4.2%. Current third quarter estimates are targeting around 3.5% given some disruption from Hurricane Florence.

“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go.”
– Mark Twain

Data deck for October 20-October 26: