Indeed, rough seas in the global macroeconomic environment are having a pronounced effect on us equities, including our favorite. I feel like I don't have a good read on things right now, but I suspect that we are in for prolonged period of semi-stagnation in US equities prices while oil is cheap, followed by a massive and irrationally exuberant rally when oil is allowed to appreciate again by the Saudis later in 2015. When that may come to pass is anyone's guess.
All the active trades I am seeing are in foreign currency exchanges (ForEx), where these global macroeconomic tides are sending currencies on massive swings against each other. JPY/USD was the story a few weeks ago, now traders are salivating looking at Eurozone pegs. Interesting times.
I could do with less deflation and more fiscal stimulus, personally.
I agree. Data is all over the place right now but my gut feeling is that QE will help the EU tremendously, although it will arrive much later than the US's QE. The combined effect of Japan's & EU's QE can only help spur growth for the global economy and fight deflation. I also agree that inflation is the where we should be headed, just not in home prices, that area should deflate a little more.
IMO the recent development in the stock market tracking oil prices is a cautious play by large institutions and retail investors who are fearful of what this one data, in oil, might represent. For the average investor like myself, I am more optimistic of the future now than I was a few years back, mainly because the U.S. remains healthy and on track for higher growth for 2015-2016 as forcasted by the IMF.
I believe the Chinese GDP drop of 0.1% is overblown, and was expected. Due to China's growth in the standards of living, companies are naturally going to take manufacturing to other regions of the world such as India, Vietnam or Africa. Africa's GDP continues to grow at a very healthy pace as China has pumped a lot of money into that economy, and it's proving to be a great growth story for that battered continent. Samsung has recently announced a new multi-billion factory in Vietnam, a sign that China may not be the recipient of future manufacturing, which will undoubtedly benefit other nations in Asia.
I think foreign exchange currencies will be highly volatile during this time, there are so many things tide to foreign currencies I don't think I can ever stomach that kind of trade. Japan may need to lower the value of its Yen, like the Euro to the dollar of late to spur growth in their economy. With the U.S. Rolling ahead full speed, our currency should remain strong, just how much stronger than the Euro or Yen remains to be a discussion per QE has yet to show its effect on Japn and yet to start in the EU. Because of QE, I remain optimistic, it's worked for us under Obama, and should work for other countries, this should be good for fighting deflation, but only if home prices stably fall 2-3% per year as appose to a free fall. My next question is how much QE will Europe bring? My guesstimate is $500-$800 billion.
