Wednesday, September 1, 2021

Morning Note: Coming Off the Boil -- And -- A Pet Peeve

Global PMIs overnight confirmed that economies are indeed coming off the boil. Whether it's a natural come-down from what we'll deem an overdose of government stimuli or it's more about the delta variant, or a bit of both, remains to be seen. 

Now, on balance, nothing screams recession right here, and there are indeed your pockets of strength, or, let's say, your pockets of confidence. Japan capex for example:   emphasis mine...

(Bloomberg) -- A rise in Japan’s business investment is
good news not just for growth, but also for the nation’s stocks
because it signaled companies were starting to plan for their
future past the pandemic. The benchmark Topix now has a clearer
path to test the 2021 high, after a return to state of emergency
across the country weighed on risk appetite.

The Q2 data reflected the state of economy before the delta
variant pushed Japan into its worst outbreak of infections. But
the revised data also showed how resilient Japan Inc. has been
in terms of investment after a major cutback in the second
quarter of 2020 at the height of the pandemic panic. It signals
that companies are learning to live with the endemic and
planning for a post-Covid era.

To visualize this morning's main point, here's Citigroup's global economic surprise index (measures actual data against what economists had predicted). Below zero (white horizonal line) doesn't mean recession, it just means things aren't as rosy as economists previously thought:


And here's the U.S.-only version:

Asian equities were mixed overnight, with half of the 16 markets we track closing lower.

Europe's leaning notably green this morning, will all but 3 of the 19 bourses we follow trading up as I type.

U.S. stocks are mixed: Dow down 50 points (0.14%), SP500 up 0.15%, SP500 Equal Weight down 0.17%, Nasdaq 100 up 0.62%, Nasdaq Comp up 0.56%, Russell 2000 down 0.11%.

The VIX sits at 16.44, down 0.24%.

Oil futures are down 1.27%, gold's down 0.16%, silver's up 1.25%, copper futures are down 2.30% and the ag complex is flat.

The 10-year treasury is up (yield down) and the dollar is down 0.13%.

Led by uranium miners, silver, utilities stocks, Asia Pac equities and emerging market equities -- but dragged by MP (rare earth miner), metals miners, base metals futures, oil services and materials stocks -- our core portfolio is up 0.09% to start the day.

From Dan Levy's insightful book Maxims for Thinking Analytically:

“One of my greatest frustrations when reading the newspaper is when someone explicitly or implicitly judges the quality of a decision on the basis of its outcomes, rather than judging the quality of the decision in the context of information that was available at the time. A related pet peeve is when politicians and others claim that an improved economy, or decreased pollutant emissions, or some other raw change, is evidence of a policy success. The comparison that ought to be made is not how things have changed from time A to time B, but rather how things are at time B, compared with how they would have been without the policy.”

It's one of mine as well...

Thanks for reading!

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