A very exciting day as markets present opportunities in all directions.
US Retail Sales incredibly strong with a 0.7% gain in July.
The issue here, however, is that this is perhaps largely due to the huge sale efforts that took place both online from Amazon and at major stores in general. It could be the case, that all of that Retail Sales gain completely disappears in August.
Remember, we did say this would be a strong result, but possibly the last of the good Retail Sales numbers for quite some time.
When looking at the data on the day, it was clear why the US dollar is strong with another whopping $147.8 billion of capital inflows from abroad in June.
I would like to make the point that the new absurd Federal deposit guarantees for the big banks are not only distorting US banking, but also attracting capital from around the world. This too is a real factor in the strength of the US dollar.
Further across the data flow of the day however, things get much worse for the US economy.
The Manufacturing sector has been in recession all year. The NY Empire State Manufacturing Index crashed yet agin. To -19 in August.
Similarly the Housing Industry, though it had shown signs of emergence recently. The slight rebound seen, albeit at the equivalent depths of the covid lockdown period, seems to already be petering out and rolling over. The NAHB/Wells Fargo Housing Market Index fell sharply from 56, to just 50 in August.
The Retail Sales number represents the best US consumers, who remain sentiment depressed by the way, could do on the back of massive super-sales efforts by distributors and stores.
That was as good as it gets. All other data is pointing to a very steep downtrend period now immediately confronting the US economy.
This comes on the back of seriously worrying data out of China on all fronts yesterday. As well as the clear loss of global demand showing up in those previous China export numbers.
The world’s two largest economies are in serious trouble.
Both their property markets are facing cataclysmic moments. In the US it looks like being a double simultaneous hit for both commercial and residential sectors.
Inflation is ticking higher again and there will be no Fed rescue.At least China has the ability to lower rates to 2.5% and further.
Washington also maintains a re-election focus ‘head in the sand’ the economy is strong stance and rhetoric. Which means absolutely no policies are being formulated for the fast deteriorating economic situation.
This is a truly disturbing state of affairs. Not one where sitting happily long stocks is an appropriate policy. Extreme spotlight high-volume attention to your asset holdings and equity holdings is the very least that is required at this moment.
Playing good defence at the right time can be a very empowering approach to markets long term.
Market commentary from Clifford Bennett, chief economist at ACY Securities
