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It's a nasty day to be long Wall Street's "synchronized global recovery." Chinese stocks are down -20% from their January highs. Emerging Market equities, like Argentina and the Philippines, have been rocked by the one-two punch of a stronger dollar and slowing growth. Italian equities are down -12% since early May.
Our read on global stagflation remains firmly intact. In other words, it's not the threat of President Trump's trade wars that continue to weigh on global equity markets, it's slowing economic data. We don't expect these trends to reverse anytime soon.
#ChinaSlowing
The evidence of global growth slowing is everywhere. The latest news out of China is that the PBoC lowered the reserve requirements for some Chinese banks, thereby releasing $108 billion in liquidity. The media quickly blamed President Trump's "trade wars" for the move. However, the economic tea leaves suggest China's ongoing growth slowdown is the culprit.
Emerging Markets
The ripple effects of #ChinaSlowing are already being felt in Emerging Asia, like Philippine equities. (China is one of the Philippines' primary trading partners. #ChinaSlowing = Not good.)
Meanwhile, in Europe...
We continue to forecast #EuropeSlowing, despite ECB head Mario Draghi's claim that European "growth momentum" is alive and well. If the data is so good, why did Eurozone Industrial Production get more-or-less cut in half in April (1.7% YoY ↓ from 3.2%)?
Before You Go...
You're going to want to watch this video with CEO Keith McCullough explaining why the U.S. dollar bottomed and the resulting investing implications.
