Market On Open, Monday 4 August
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Stocks Are Not The Economy. Most Of The Time.
by Alex King, CEO, Cestrian Capital Research, Inc
Stocks to a hit Friday as a result of (i) they were a little overheated anyway (ii) the jobs numbers weren’t wonderful (iii) the prior jobs numbers were revised down meaningfully (and if less jobs then less consumer spending which is bad for stocks in the medium term at least) and / or (iv) the person whose job it is to send the jobs numbers out was relieved of their job on account of jobs numbers. Thus making the jobs numbers one job worse.
These sorts of moments do tend to trigger market reversals but not, of course, every time. Most such dips are to be bought, but the problem is that if flying blind it is hard to know whether such a dip, when bought, is to be celebrated or feared.
The reason we publish the charts in this note every trading day is to keep a close eye on actual price and volume movements in the major indices, bonds, commodities and sectors. This way we aim to provide early notice of when a long-term trend changes; or early support for the idea that what just happened (on any given day) was a nothingburger and that stocks are likely to continue upwards.
Today is no different, as you’ll see below.
Sometimes Stocks Are The Economy Though
The economy is to the S&P and the Nasdaq as fundamentals are to the price of Apple, or Microsoft or whatnot. Most of the time it doesn’t matter - stocks are going to go up anyway.
But when it matters, it really matters, and usually it’s when things turn bad.
The measures used in official statistics are all backward-looking lagging indicators. This is why we have the business cycle, because everyone from the Fed to banks to investors to CEOs reacts too late and reacts too hard. That’s why the economy and the market is boom-and-bust.
If you want to know when the next bust is coming, you need to know which real-time indicators to look for.
I’m delighted to invite you to a FREE, LIVE webinar on MONDAY 11 AUGUST at 1615 EASTERN where Henrik Zeberg, Head Macroeconomist at Swissblock, will be talking to us about how to spot the next turn in the market. (Spoiler alert: he thinks the economy has already turned).
You can register here.
Next up - our daily subscriber-only take on the US equity indices, volatility, bonds, oil, crypto, and key sector moves.