My View on the Markets and The High Priest of S&P Stats
Along with the auto disaster known as VW, the interview topics included:
- Drop in equities more troublesome when there’s no important news. It means that the markets are taking the Fed at their word and are concerned global growth will remain weak. USD ag Brazil real is at a new high and underscores weak demand from China for extracted metals.
- President Xi spoke to reporters for the first time and didn’t calm the markets. He said China was an unstable ship and said that the government would continue to play a major role in the economy. But made no pledge to increase stimulus. Coupled with the downgrade in Chinese banks by S&P yesterday, China continues to be an issue for the markets.
- US politics: no govt shutdown and 2016 Republicans starting to drop out with Perry and Walker leaving race. No shutdown is good for mkts as it takes away uncertainty. More Republicans dropping out is bad for Trump and good for Bush and Rubio… which is good for tax reform, which is good for markets.
Bottom Line on the Markets:
August swoon was triggered by China and their inability to understand their actions. The CNY currency deval disaster generated tremendous uncertainty for the markets and tremendous outflows of money from China Today’s weak flash Chinese PMI underscores the non-government statistics out of China are vastly lower than official data. This dichotomy is underscored by the Fed’s inaction and the reason put forward for that inaction: uncertainty over global growth. In other words, the Fed has verified that China is the major economic problem in the world.
The combination of uncertainty over China and uncertainty over Fed actions leads to uncertainty in the markets. In turn, this leads to selling. Both need to be resolved or every item that arises will be seen through a negative prism and more selling will occur. Yesterday was a perfect example of a light news day coupled with a strong move to the downside for equities.
Engage with Andy Busch brings on an analyst the WSJ calls “The High Priest of S&P Stats” Howard Silverblatt from S&P Dow Jones. We cover key metrics every investor needs to know: share buybacks, earnings, dividends, capex and cash on the balance sheet. This is insight on a level you can’t get anywhere else, check it out!
Originally posted on AndrewBusch.com.