“The supreme art of war is to subdue the enemy without fighting.”
-Sun Tzu
You shouldn’t need timeless Chinese military strategy quotes to remind you that if you’re on the other side of the table from the Chinese, you probably don’t know what they’re really thinking.
As Tom Miller reminded me in China’s Asian Dream, “like President Putin, Xi Jinping is a nationalist seeking the rejuvenation of his humiliated country.” (pg 85)
Even though there’s no “deal” between the USA and China this morning, are you really going to bet your hard earned net wealth on an alleged deal with Xi being the catalyst to reverse the US economic cycle?
Back to the Global Macro Grind…
Like USA’s growth and inflation data #slowing yesterday (and the Atlanta Fed finally dropping their US GDP nowcast from 2.73% towards where we’ve been since SEP of 2018), we data dependents also get Chinese economic data:
- Chinese headline INFLATION (CPI) #slowed to +1.7% in JAN vs +1.8% in DEC
- Chinese Producer Price INFLATION (PPI) #slowed, big time, to +0.1% in JAN vs. +0.9% in DEC
- China’s Money Supply (M1) #slowed to +0.4% in JAN vs. +1.5% in DEC
And Chinese Bank Loan growth continued to slow, despite plenty of US naval gazers hoping all of this “Chinese Stimulus” and “deal” tweeting was going to magically re-accelerate China’s #slowing economy.
In reaction to these numbers, the non-Old-Wall Journal accurately reports:
“Chinese credit data continues to register as underwhelming for Shanghai Accord 2.0 Bulls. The massive ramp in base money growth in JAN was met with almost no impact in broad credit growth, in YoY rate-of-change terms. This dynamic underscores just how difficult it is for Beijing to demonstrate growth in credit, and ultimately economic activity, against cycle-peak comparative base effects…”
*real-time Institutional Research report from Hedgeye Jedi and Chinese Data Guy in Chief, Darius Dale
“So”… do you want data and market response, or do you want more cowbell and Trump tweets? In reaction to the ROC (rate of change) news, Chinese stocks dropped -1.4% overnight (resuming their crash, -24.6% since JAN 2018).
Having been the only Independent Research firm that went bearish on both Chinese #GrowthSlowing and Global Growth #Divergences (China, EM, and Europe #slowing while the US was still #accelerating) at this time last year…
We humbly submit you should consider our data driven Cycle Research instead of watching CNBC.
On that score, USA’s economic data this week reminds you why US GROWTH and INFLATION expectations crashed during #Quad4 in Q4 to the December 24th lows:
- US headline INFLATION (CPI) #slowed to +1.6% in JAN from +1.9% in DEC
- US Producer Price INFLATION (PPI) #slowed to +2.0% in JAN from +2.5% in DEC
- US Retail Sales GROWTH #slowed, big time, to +1.9% y/y in DEC vs. +4.5% in NOV
Oh, but KM, ‘Retail Sales only slowed because the stock market went down’…
Ah, ok. Got it. And what makes GROWTH and INFLATION exposures go down again? Right, it’s The Cycle, eh! And that part about The Fed going Dovish Enough to get Treasury Bond Bulls paid? That was in response to The Cycle too.
Q: as the base effects (comparative 2018 #PeakCycle growth rates) steepen in Q1, Q2, and Q3, what’s the catalyst to get US Growth, Inflation, and Profit Cycles to re-accelerate from here?
- A China deal?
- A European #Recession?
- A Very Loud and Extremely Large Cowbell?
It’s a serious question. Send me your answers. I’d be more than happy to publish the most thoughtful (data, not narrative driven) answers to our growing audience. I always need to know what I don’t know.
I certainly don’t know what Xi is thinking as he slow walks Trump’s team through these endless “meetings.”
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.60-2.74% (bearish)
UST 2yr Yield 2.41-2.54% (bearish)
SPX 2 (bearish)
RUT 1 (bearish)
REITS (VNQ) 81.60-84.83 (bullish)
Shanghai Comp 2 (bearish)
VIX 15.10-20.09 (bullish)
USD 95.25-97.36 (bullish)
EUR/USD 1.11-1.14 (bearish)
Gold 1 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
