The Latest On The Global Economy: China & Europe Flail Despite High Vaccination Rates While America Chugs Along And Hopes The Unvaccinated Get Sensible

Low volumes in the stock market all summer long are finally coming home to roost as the bears feed on bad economic news and take the stock market lower. The volatility risk premium points to a higher market over the next few days, but my technical reading of key stocks in the S&P 500 is neutral. Yesterday's cross-asset action brought just one positive factor for US stocks. Oil's chart continues to signify global growth. Given the pessimism boiling up in global markets I expect the S&P 500 to be range-bound over the next few days.

Besides the lack of conviction in the bull market, a major reason for the recent pessimism is bad news from China on nearly all economic fronts. Property developer Evergrande will miss a forthcoming interest payment, and construction spending is falling, signaling the property market is fragile, while in the manufacturing sector steel production is falling and consumers are buying much less than expected. China’s zero-tolerance COVID policy is partially to blame as lockdowns are back, but the CCP’s manhandling of the private sector is a more profound concern. All this comes as the money market is suffering its periodic convulsions due to the poor structure of the banking market and constant interventions of the PBOC. The result is declining confidence.

Europe presents different problems as price of electricity is rising and this complicates its progressive environmental policies as well as geopolitical stance, since Russia is holding back gas shipments and exacerbating the energy crunch. This directly influences the consumer and makes it likely Germany tilts to the Left in the coming election. This too inspires little confidence. But I expect the market to resume its bull run shortly as the US is in relatively solid position, as evidenced by the latest inflation reading which proves the Federal Reserve and the bond market have been correct in calling inflation a temporary phenomenon. The Fed means to continue feeding liquidity into the market and this ultimately means a higher stock market assuming vaccination rates rise and Kim Jong Un doesn’t go crazy.

My current market positions are in Activision (ATVI), American Express (AXP), Amgen (AMGN), Gibraltar Industries (ROCK), Johnson & Johnson (JNJ), 3M (MMM), Pfizer (PFE) and a short position in the SPX (UPRO and SPXU).