The Latest On The Global Economy: Retail Sales Drive The Bulls To Temporary Thanksgiving Spirits

The seasonal joy continues to push equity markets higher as consumers spend despite growing fears of the future. The volatility risk premium points to a higher market over the next few days, while my technical reading of key stocks in the S&P 500 is bullish. There are several negative factors across global asset classes. Copper is pointing to declining global GDP expectations. The action in currencies signifies $US strength. But taken together, the market looks set to overcome these concerns and rise moderately over the next few days.

Inflation worries are moving interest rates higher in the US and that is pushing the $US higher since American interest rates are higher than in most DM and comparable to many EM. But the same is true for China, and the Yuan is not only pacing the $US but trading very strong against its trade-weighted basket (CFETS). The bipolar world is not particularly good for financial markets but for now the seasonal rally is stoking fears of TINA and that is keeping the bulls from selling into down days. The unexpected US-China cooperation on Cop26 and now on oil reserves is further stoking the bulls, as is news from the BIS that inflation would be below 3% if supply disruptions weren’t present. And there is some hope we have peaked in that regard, considering LA Port data on empty containers and decent auto sales which point to chip supplies normalizing.

But Europe continues to suffer under Covid, particularly in Mittle Europe, while Russia and its vassal Belarus play games with gas supplies and the European courts stop and start the nordstream pipeline that is so key to Russia. I expect fears of a global slowdown to mount after Thanksgiving as a correction sets in.

Yesterday I added a position in Goldman Sachs (GS); my other current market positions include a large cash position, and the following holdings: Activision (ATVI), Amgen (AMGN), Apple (AAPL), Johnson & Johnson (JNJ), 3M (MMM), Pfizer (PFE) and a small net long position in S&P 500 (the levered inverse ETF SPXU and levered ETF UPRO).