Market On Open, Monday 17 November
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A Heads Up, Maybe
by Alex King, CEO, Cestrian Capital Research, Inc
Japan just reported a negative GDP quarter, with Q3 coming in at -1.8% growth vs. the same period last year. It was a smaller drop than expected but negative is negative. The factors were manifold but there seems to have been some impact from a higher-than-normal level of automotive exports to the US in Q1 and Q2, and lower-than-normal in Q3, attributed to pull-forward demand seeking to obtain good prior to the tariff impact. A stimulus plan is expected to be announced on 21 November.
I wonder if this is a heads up for what we will see across Western economies in the coming months. You can find plenty of data for weakening economic fundamentals if you go looking in the credit market - auto loan delinquencies, cracks in various aspects of private credit - it just hasn’t showed up in the equities market yet. For some time now there has been a drumbeat of wise heads expecting economic problems in the US to be followed by stimulus and when that stimulus effect peters out, a material market correction. Neither I, nor such commentators themselves, know if this will prove true or not, since none of us can see the future. But just as sometimes you can use one stock as a leading indicator of stocks, one sector as leading indicator of other sectors - sometimes you can use international markets as a little glimpse into the future too.
For two different takes on this theme (economic weakness, market stimulus driving new highs, then a correction as the market follows the economy down) I suggest you read the work by Henrik Zeberg, here, and David Hunter, here.
We don’t have to know the future; we can just trade and invest based on what we see before us. So let’s take a look at what markets are telling us now.
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OK. Let’s get to work - our daily Market On Open note below covers yields, bonds, equity indices, sectors, oil, gold, Ether, Bitcoin and more, as always.