Reiterating what I said on an earlier post about a slow down in world/economic growth.
2 news articles came up on the side panel of my IG trading platform yesterday that form part of my Bear thesis and that what is going on now in the market isn't simply a "Buy the dip" kind of correction..
A Weakening Profit Outlook is The Latest Worry for the S&P 500
https://www.bloomberg.com/news/articles/2018-12-11/profit-outlook-weakens-for-s-p-500-in-latest-worrying-plot-twist?
Wages Rises Accelerate to Fastest Pace Since 2008
As we know the media are reactive to whatever the news is, they then try to conjure up a narrative from that.
So if you're just trading from the headlines and waiting on Trump to save the stock market then you will be even further behind curve than what the media is..
Just ask yourself,
Do the headlines determine whether the Fed raises/lowers interest rates or does the economic data?
Do the headlines determine whether the stock market goes up/down or does the underlying economics..?
Weakening profit outlooks, accelerating wage growth and reduction of job openings are all very clear signs that this market/business/economic cycle has peaked and that we are now likely heading into a recession..
(also there was something about a yield curve inverting last week...)
Publicly available government economic data from last Friday showed that 150k new jobs were created, this was a 25% reduction from the 'consensus' 200k forecast...
I wonder how many more of these economic 'forecasts' will fall short of the 'consensus' expectations...?
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There are a few important (US) economic data points being released this week.
The
Consumer Price Index "Cost of living index/ CPI" is released tonight.
A lower than expected number is seen as deflationary.
This is because supply is now outstripping demand and thus prices will fall to meet a reduction in demand.
A lower than expected number will also give support for,
- The Fed not raising interest rates past December because we are now experiencing deflation
- That the cycle peak has come and gone
- That the stock market goes up/down based on the supply/demand of an economy and not what Trump tweets or whether you believe in Santa clause or not...
Deflationary pressures and an economic slowdown gives the Fed a good reason to not hike and/or even lower interest rates in the not to distant future...
For this reason, being Long (Biased)
on US Treasury Bonds has worked out as a great investment decision and also a very profitable one too!
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On Friday we will also see the release of another few important economic data points,
- Retail Sales
- Industrial Production
- Manufacturing PMI
If these numbers come in lower than expected and/or lower than the previous month then it will explain why the stock market has fallen so much in Oct/Nov and also give good reason why it will continue to fall.
This idea/strategy is based on supply & demand economics and that the market is always front running us.
By combining the
publicly available government economic data, we are mostly able to stay ahead of the curve/media/consensus/sheep/48&34 in our investment decisions.
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This is as far back as I could go on the Manufacturing PMI but does show the decline from the 2015 "US mini recession".
A level above 50 is considered as an expansion from the previous month a level below 50 is considered a contraction from the previous month.
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If the economic data shows an increase this week from the previous months then it
will be bullish for equity markets.
If the data shows a contraction then it
will be mostly bearish for equity the markets.
How bearish will depend on the data but if the market is really front running us, then I expect it to be quite bearish...
So as long as the data continues to show deflationary pressures and a slowdown in growth then my investments decisions will remain the same.
Long - Long term US Treasury Bonds (halt/lower in interest rates)
Long - Gold (bad market conditions, devaluing of the dollar from no more rate hikes)
Short - Tech, Momentum, market indexes.
(20min delay)
