Our short equities views continue to work well.
While many are telling the vanilla story today, of weaker than expected US Payrolls for the market’s decline on Friday, there is actually much more going on?
The run of economic data across Europe, the USA and China only furthers our central scenarios of generally lowing economies with persistent inflation in the West.
European Retail Sales contracted 0.3% last month. The data jumps about, but there have been mostly negative months this year.
As consumers continue to stumble under the weight of energy sanctions, and broadening price pressures.
In the US, everyone focussed on the Payrolls data, which has been the least important information on the economic score card for decades now.
Employment is the latest, most lagging and delayed of all indicators. So much so that it shouldn’t be called an indication of anything, but merely a confirmation of an economic scenario previously held.
It suits my view that the jobs data was lower than expectations, but I feel no need or accuracy in drawing any attention to it. Except to look the other way.
What was of real interest to this writer on the day, was the continuing upward pressures in wages growth. Average weekly earnings in the US rose another 0.4% in July. This is the number the Federal Reserve will have noticed too.
The Fed will remain on hold, but as we, and we alone I believe, have said all along, rates are up here to stay.
With a continuing tightening bias. There was never going to be a pivot to cutting rates. What a load of nonsense. It sold a lot of copy however, as a nice fictional piece.
What does all of this mean for markets. Well despite all the data turning exactly as we said it would, the real reason the market is down is because the big funds, the slow monoliths, are finally catching wind of the idea that there is no turnaround economic recovery coming at all.
Main Street has been quick to realise this, and this is why they have been laying off supposedly precious hard to find staff in such large numbers all year.
Several major US cities are hollowing out for far more reasons than working from home. Things are getting, have been ugly down on Main Street for quite some time. The post-covid party is more than over.
Wall Street, from their ivory towers never saw this coming and is way behind the curve. This is why the funds industry’s now starting to catch on to the bears reality out there, should be of concern to every long stock investor.
In Europe you still have a serious war of immense tragedy and dislocation unfolding. It cannot be compartmentalised on an economic basis as so many of the big houses have tried to do.
The impact stretches from psychological on consumers and businesses across Europe to their actual spending and investment behaviours.
I love to be an optimist, but to do so in the current global matrix would be to badly mislead you.
As I continue to suggest, that multi-month rally in equities is most probably done and we are just in the beginnings of a new bear market phase.
The optimism I do have is in all of our abilities to successfully manage these major trends in either direction. Thanks to the multitude of financial products available to us.
The small investor can move faster and with similar information to the large players. This could be one of those moments.
Market commentary from Clifford Bennett, chief economist at ACY Securities.
