2016/05/12 TrendView VIDEO: Global View (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Thursday, May 12, 2016 (early)
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Global View: All Markets
The central banks have obviously hit the end of the (very distended) line on effective influence of NIRP (Negative Interest Rate Policy) or further Quantitative Easing (QE.) That is obvious from the weaker economic data (even if that has moderated of late) like the soft US Employment report. That is no longer bringing a ‘bad news is good news’ response from the equities. It is also the case the broader ‘macro’ outlook remains weak for the developed economies. Consider the next set of OECD Composite Leading Indicators (CLI) that were released Wednesday morning. They have been a very useful forward indication for all of the weakening global economic tendencies out of last year into early this year.
They are showing some strengthening from the previous abysmal forward indications for the emerging market economies. Yet their less than optimistic outlook for much of the developed world continues to reinforce our bearish instincts, as you can see in our mildly marked-up version. Especially the weakness of the US, UK and Germany, with stallouts now seeming to start in some of the previously more upbeat European economies, remains negative. The upbeat psychology of the monthly report editors shows up once again in a typical ‘rose-colored glasses’ headline trumpeting “Stable growth…” Especially take a look at the highlighted data in the statistical table on page 3 and draw your own conclusions.
The OECD CLI are rarely a near term trend decisive influence. As such, we are hesitant to ascribe Wednesday’s June S&P 500 future selloff to them when other influences better explain it. Yet the market did fail once again from Tuesday’s test of the key 2,075-78 range prior to heading right back down to next interim support at 2,060-58. With it higher again this morning the question is which of those important near term areas gets violated first.
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Video Timeline: It begins with macro (i.e. fundamental influences) discussion on the factors noted above as well as some of the key specifics of economic data that actually strengthened a bit in the US but with weakness out of China and the UK.
It moves on to S&P 500 FUTURE short-term at 03:00 and intermediate term view at 06:00, with OTHER equities from 08:00, GOVVIES beginning at 10:30 (with the BUND FUTURE at 12:45 including implications of the early March expiration rollover) and SHORT MONEY FORWARDS from 14:15. FOREIGN EXCHANGE covers the US DOLLAR INDEX at 17:00 EUROPE at 18:45 and ASIA at 21:15, followed by the CROSS RATES at 24:00 and a return to S&P 500 FUTURE short term view at 28:15. We suggest using the timeline cursor.
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Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion and TrendView Video Analysis and General Update. Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion.
NOTE: Back on the evening of December 8th we posted our major Extended Perspective Commentary. That reviews a broad array of factors to consider Will 2016 be 2007 Redux? For many who believe that the US economy is really strengthening and can once again lead the rest of the world to more extensive recoveries, this may seem a bit odd.
Yet there are combined factors from many areas we have been focused on since the early part of last year which are less than constructive for the global economy and equity markets. We suggest a read if you have not done so already.
We pointed out in December that in the face of another likely Santa Claus Rally this was not an actionable view during the year-end equities rally. Yet it was (and remains) important background to utilize in 2016. This is much like our major late 2006 perspective on Smooth Rebalancing? …or… The Crash of ‘07? (even though the actual crash was deferred into 2008.)
▪ As we have anticipated for a while and noted more pointedly on the recent equities weakness in spite of the still quite accommodative central bank positions, what we are now seeing is the denouement of the extended multi-year central bank efforts to rescue economies that climaxed in the recent US equities rally. Yet that was without essential assistance from structural reforms from the political class. As emphasized ever since our February 9th Fear & Loathing in Marketland post:
The next financial crisis will occur when the investment and portfolio management community (and ultimately the investing public) realizes that the central banks alone cannot restore the robust growth from prior to the 2008-2009 financial crisis.
The weakness for some of the major developed economies in the OECD Composite Leading Indicators noted above is another sign that years (and in Japan’s case decades) of QE and recently sustained very low interest rates are not restoring the robust growth from prior to the 2008-2009 financial crisis.
The extensive analysis of the broader ‘macro’ background in previous posts (especially the Thursday, April 28th Special Alert: Equities Critical) has already explored all of the reasons the equities might be at the top of a more major bear phase, and we refer you back to those for that insight. That Thursday morning Special Alert: Equities Critical also refers back to more meaningful previous ‘macro’ analysis of the economic data, central bank efforts, and the risks in the lack of structural reform from the political class.
This is a good reason why diminished global trade (serial weak import figures even for economies running positive trade balances) and sinking corporate earnings (even if they always beat manipulated estimates) are a problem. See our previous letter the Editor at the Financial Times was kind enough to publish for a very brief overview on that combined negative impact.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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