The Latest On The Global Economy: Decelerating And Orderly

The global economy is decelerating across the US, Europe, China and most of Asia (excluding India) but the pace is so orderly that corporations have the time to program profits by managing supply chains, workers and price increases where possible. That’s a good backdrop for markets, and 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 is however, one negative factor across global asset classes. The US yield curve is bear steepening. Consequently expect the S&P 500 to be range-bound over the next few days.

The move up in interest rates is modest and I don’t expect it to explode beyond the range of this past summer. The reason is that interest rates around the world have little room to move higher, except in high growth countries. In Japan the economy is so slow that despite the political problems within the LDP leadership there will be a substantial fiscal package to lift the economy. In Germany the trade and output figures are modest but expectations are declining, suggesting even more slowing. And in China the trade figures are bullish while the property and other sectors (i.e., tech, education) are going through daily convulsions as the CCP clamps down on growth.

Yesterday I added positions in 3M (MMM) and Activision (ATVI). My other current market positions are in American Express (AXP),, Johnson & Johnson (JNJ), Pfizer (PFE) and Starbucks (SBUX), and a short position in the SPX (UPRO and SPXU).