Note Précis March 5,2019: Market Probing Forays, Likely Nothing More – Even as much is being made about the equity market recovery from the lows of late 2018, we see the more recent and volatile to-and-fro activity as being probing forays, likely nothing more. The Federal Reserve has announced a hiatus in rate increases as well as in balance sheet reduction. Similarly and rather than using constructive ambiguity, other major central banks from the European Central Bank to the Peoples’ Bank of China appear with mixed messages.
Global growth has appeared to be slowing towards a 3½ – 4% annual GDP rate. In Europe, growth has been slow and in some cases flirting with recession. The U.S. State of the Union centered on patriotism but less so on vision about infrastructure while tax cut stimulus of 2018 is now done and trillion dollar deficits appear for years to come. Much business aspiration has been on China. The early March 2019 Chinese National People’s Congress opening addresses notably appeared pointing to GDP growth slowing to the 6 – 6 ½ % annually and on listing the many aspects needing handling, from rural areas to unemployment to defense to monetary reserves. One challenge for China today seems avoiding mistakes of tapping cheap credit in excessively building infrastructure of limited utility as happened in Japan in the 1990s and Spain in the 2000s.
Even with a decade of massive global quantitative ease, the key Financials sector seems unsettled worldwide from advanced areas like Germany to emerging ones like India. From consumer discretionary to staples alike, companies report revising production and sales logistics. In emerging economies like China, aspirational consumers may be moving to espouse quality and taste over paying up for global brand recognition while in Europe and the United States, consumer demand seems fickle, despite low rates.
In the capital markets appear sharp swings from long standing momentum espousing quantitative ease dependence. Sharp punishment appears at the individual security level for shortfalls, especially for restructuring laggards and irrespective of sector or geography. We favor selectivity for quality and diversification. StrategeInvest’s independent consultancy operates as Subodh Kumar & Associates. The views represented are those of the analyst at the date noted. They do not represent investment advice for which the reader should consult their investment and/or tax advisers. Any hyperlinks are for information only and not represented as accurate. E.o.e. fffffffffffffff