Global markets have opened Monday trading with a slight risk-on bias.
The Euro, GBP, and AUD are all attempting to consolidate after some weakness, with a look to move higher. Is the US dollar topping out?
Further evidence of this is that gold and oil are both holding up reasonably well.
Stocks are generally bid on the day.
The economic fundamentals of the moment show reasonable job creation in the USA, but the ISM for manufacturing is flashing warning signs. While Europe faces rampant inflation that continues to climb, China faces a significant impact from Covid lockdowns.
The ongoing tragedy of Ukraine confirms the general supply chain disruption, scarcity of energy, and food outlook for the world.
There is no argument that the fundamental outlook for Europe, China, and the USA, is anything but worrisome.
There is a bullish argument. Actually, a couple of them.
The huge quantitative easing and near-zero rates of the past couple of years have created such a globally circulating wash of money, that it can still only largely find a home in equity markets.
The second valid consideration, is that share buybacks by the biggest corporations in the world have been a major force in the recent strong recovery of markets. These will continue.
Australian stocks have the additional benefits of high commodity prices and the world’s slowest central bank.
The principal argument for being bearish on equities is the economic outlook. Which I described earlier as the worst matrix globally I have seen in a third of a century of being in markets.
The bullish argument is very simple indeed. There will be further high levels of speculation on the market.
Economic fundamentals versus sentiment greed? The latter always wins in the short term. The former eventually with delay and emphatically.
A price level to watch is 4450 in the US500. A New York close above there would suggest the balance was shifting to further speculation in a sustained manner. Often called risk on.
Expect Monday trading around the world to have a slight drift higher bias. In NY we will discover if there are any of the largest funds adjusting their portfolios for the economic reality ahead of us. Which could see a US recession in the second half of the year.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
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