The global investment community is slowly waking up to the idea we have touted for a long time: That there is a post-Covid-recovery-euphoria ‘hangover’, coupled with associated inflation and now a European war and fresh inflation impetus as well as the world’s biggest port being closed.
This equates to economic disaster and stock emperors with no clothes.
Safe-haven and energy security will increasingly be sentiments of flavour among traders and investors. These themes have yet to hit Wall Street types in full, and so such notions, the right ones of course, are far from being even partially, let alone fully priced in financial markets.
Some commentators, like Moodys, are still trying to talk up the positives? Just to highlight the disconnect we have discussed here previously of Wall Street from Main Street.
The real world is very different indeed to the laughably positive mental attitude type spins coming out of the ivory towers of the financial industry itself.
This is absolutely typical of all major crashes like the Great Depression, the 1987 crash when the ASX fell 50% in just a few days and of course the Global Financial Crisis.
These are not, though they may seem so to younger traders, ancient history. Relentless positive bargain hunting is always a cult-like attribute to such situations.
The US market is right now very much at the edge of a huge void.
Imagine a giant alien taking a huge bite out of Mt Everest, but the peak was still there overhanging a void to near sea level. There remains just a bit of the slope from the top still in place.
That is what equity markets have been slipping downward on. Until now. Now, markets are at the edge of that back to earth drop.
What do you think? How do you feel? It is worth paying attention.
Fundamentally, people tried to talk up US jobs data? The most backward-looking economic data series in existence, which was in any case just in normal neutral territory. And, after having retreated substantially from the post-Covid-euphoria. Yes, we are also in an economic hangover phase.
More worrying was the strong surge in US Consumer Credit data in the US. Are US consumers suddenly borrowing as a way to deal with higher prices?
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
