Our October 30, 2020 Macro Update was subtitled "Pulling Forward." Here's a snippet:
"Sales of stuff that equips the home has risen amid what we'll call, for the moment, the stay-at-home economy. The services component in the latest spending data is, on the other hand, declining. Question being, how much of the recent activity is a pulling forward of purchases that would've otherwise occurred over the months and years to come? Answer: A lot! Next question, what will the numbers look like as things get back to some semblance of normalcy? Answer: They likely drop, a lot!"
While economists indeed expected a bit of a letdown in July (of 0.3%), retail sales, reported this morning, actually saw a 1.1% decline. Of course the delta variant was becoming a thing last month, so, indeed, that was likely a (if not "the") factor as well. And then of course there's autos (aren't many for sale [at a doable price]). Nevertheless, how many kitchen remodels and laptop computers does a family need?
As for the market this morning, I can pretty much repeat yesterday's opening line:
"A Chinese data miss, the delta spread and the disheartening scenes from Afghanistan has global equities (save for India's) heading south to start the week."
Although India's off a bit (although notably less than the US) this morning as well...
Speaking of China, ironically, while SEC chief Gary Gensler warns Americans "not to invest" in Chinese equities, investment giant Blackrock is telling the FT that folks should dive in, big:
"BlackRock’s research unit has said China should no longer be considered an emerging market and recommended investors boost their exposure to the country by as much as 3x,"
“China is under-represented in global investors’ portfolios but also, in our view, in global benchmarks,”
“It has the second-largest equity market, the second-largest bond market. It should be represented more in portfolios”
"The BII’s recommended allocation to Chinese assets is now “two to three times” that of diversified global portfolios, such as the MSCI All-World index, in which China is currently the third-largest constituent."
Aside from Blackrock's thesis, and despite China's recent regulatory crackdown, make no mistake, they have the will and the wherewithal to step directly into their notably lagging markets, and I suspect they will in relatively short order...
On a positive data note this morning, U.S. industrial production bested economists' expectations last month. We'll go there in this week's macro update.
Asian equities got pretty much pummeled overnight, with 12 of the 16 markets we track closing a bunch lower.
Europe's following suit this morning, with 13 of the 19 bourses we follow trading notably in the red as I type.
U.S. stocks are not being spared the pain (so far) this morning either: Dow down 347 points (0.98%), SP500 down 0.78%, SP500 Equal Weight down 0.91%, Nasdaq 100 down 0.99%, Nasdaq Comp down 1.02%, Russell 2000 down 1.54%.
The VIX sits at 20.80, up 9.19%.
Oil futures are up 0.25%, gold's up 0.04%, silver's down 0.52%, copper futures are down 2.26% and the ag complex is down 0.57%.
The 10-year treasury is up (yield down) and the dollar is up a not-small 0.36%.
Led by healthcare stocks, consumer staples stocks, AT&T, gold and Verizon -- but dragged notably by ALB (lithium miner), MP (rare earth miner), solar stocks, metals miners and emerging market equities -- our core mix is off 0.68 to start the day.
You've seen this quote before herein, but it's a great (and timely) one from one of history's greatest investors:
"...the big money was not in the individual fluctuations but in the main movements—that is, not in reading the tape but in sizing up the entire market and its trend.
And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"
Marty
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