The Roaring 20’s scenario, and what could go wrong

Happy New Year! Investors were happy to see the tumultuous 2020 come to a close. The past year has been one with little precedent. A pandemic brought the global economy to a screeching halt. The stock market crashed, and it was followed by an unprecedented level of fiscal and monetary response from authorities around the...

Growth, interrupted?

Two weeks ago, I rhetorically asked if investors should be buying into the cyclical recovery theme (see Buy the cyclical and reflation trade?). Global green shoots of recovery were appearing, but I identified the "uncertainty of additional fiscal stimulus" as a key risk to the cyclical rebound thesis. Now that Biden appears to be winning...

Emerging tail-risk: An invasion of Taiwan

I am not in the habit of peddling conspiracy theories, but this is inadvertently becoming a Halloween tradition. Last Halloween, I wrote about how China could control Taiwan without firing a shot (see Scary Halloween story: How a weak USD could hand China a major victory). This year, a new geopolitical tail-risk is materializing for investors...

FIFO: Can China save global growth (again)?

Remember the Great Financial Crisis (GFC)? As the GFC engulfed the global economy, China stepped up with a shock-and-awe campaign of fiscal and monetary stimulus that stabilized not only the Chinese economy, but global growth. Can China save global growth again? China recently reported surprisingly strong export growth for April, but the closely watched early...

Don’t count on a V-shaped recovery

The covid-19 coronavirus outbreak is a human tragedy, just like Ebola, MERS, and SARS. For investors, it has an economic impact. Even before the outbreak, world merchandise trade volume had been falling. New data is likely to show that the outbreak disrupted global supply chains sufficiently to further depress global trade. The market consensus initially...

The guerrilla war against the PBOC

The enemy advances, we retreat In the wake of the news of the coronavirus infection, the Chinese leadership went into overdrive and made it a Draghi-like "whatever it takes" moment to prevent panic and stabilize markets. When the stock markets opened after the Lunar New Year break, the authorities prohibited short sales, directed large shareholders...

Is the melt-up back?

What should investors make of the market's recent air pocket and subsequent recovery? John Autthers, writing at Bloomberg, proposed an analytical framework where investors view the coronavirus outbreak mainly as a China problem. The MSCI World with China exposure (blue line) has been far more volatile than the MSCI World Index (white line). The companies...

Cruisin’ for a bruisin’

Mid-week market update: Bloomberg reported that BAML strategist Michael Harnett wrote a report back on December 12 forecasting a melt-up. He believed the market's gains would be front loaded in 2020. and he projected an S&P 500 target of 3,333 by March 3. The index reached that level intra-day today, and it's still January. Are...

A 2020 commodity review

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

China, paper tiger

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

How far can Tariff Man dent the stock market?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

The Achilles Heel of my bull case

In response to my last post (see Buy signal confirmed: It's a global bull), I received an email yesterday from a long-time reader who observed that I was channeling the perennially bullish Chris Ciovacco. While my post yesterday highlighted the monthly MACD buy signal on global stocks, Ciovacco's latest weekly video referenced the monthly MACD buy...

Is a trade deal imminent?

On Friday, Trump said that a trade deal with China was "potentially very close" (via CNBC): President Donald Trump on Friday said that a long-negotiated trade deal with China is “potentially very close” following reports that an agreement might not be reached until next year. Trump was speaking on one of his favorite television programs,...

Cyclical global recovery: Easy come, easy go?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Could this FOMO surge be a mirage?

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...

Scary Halloween story: How a weak USD could hand China a major victory

I have written before how a strong USD can be a negative for global financial stability. There are  many EM borrowers who have borrowed in the offshore USD market, and a rising USD puts a strain on their finances. In addition, FactSet reported that companies with foreign domestic exposure have exhibited worse sales growth than...