Wednesday, January 27, 2016

The big trends of 2015 look like they are abating

 -  by New Deal democrat

It's a slow week, with the big news coming on Friday with the release of Q4 GDP.

In the meantime, here are a few things to consider:

1.  In 2015, 5 things moved in lockstep: Chinese stocks, US stocks, oil prices, industrial commodity prices, all down, and the US$, up.  Those trends may be abating.

First of all, the Chinese stock market, which has been unwinding a bubble, has given back about 75% of its gain:

That's 2400 points down from the peak, about 800 left to give back the entire 2014-15 surge.  There's no guarantee the bottom will arrive at 1999, but that's not a bad target.

2.  Industrial commodities haven't retreated nearly as much as Oil:

These have gone more or less sideways since November.

Yesterday I pointed out that the spot index for the US$ is also up less than 5% YoY, for the first time since late 2014.

2.  Yay new home sales, but don't get too excited:

This series is heavily revised, usually away from an extreme high or low reading.  I suspect last February's high is going to hold for this cycle.

3.  While we might get a negative GDP print, the weakness in the economy is very concentrated.  The broader economy is holding up pretty well.  That's not a recession.

So says Prof. Tim Duy.  It's nice to have someone of such high status and academic credentials agree with my point of view.