China’s economic engine sputters as the “recession imminent” theme tries to dethrone the dominant “goldilocks” narrative.
What does this mean for my overall market thesis? That stock prices rise into Jackson Hole on August 27th, and then begin to slide into Halloween. Not much, the market is fixated on inflation and CPI.
To recap, yesterday China released its economic growth numbers. The data was not good. China’s COVID ZERO policy is taking its toll on the economy. Also, the recent crackdown on the private sector is not helping matters. This is ammo for the “recession imminent” narrative. China is a wildcard to keep an eye on.
Not surprisingly, oil got clobbered on the weak China growth news. However, this is good for the CPI data release on September 13th. Mixed data makes trading tough.
Radar blips
- seasonally weak stock prices into US midterm elections
- oil is in the CPI drivers seat
- QT is set to double
Recent trades (DVN, SPY)
DVN is very volatile and follows the price direction of crude oil most of the time. The stop came close to being triggered yesterday. I’m sticking with the current level of $59.98. It’s important to manage risk as oil is not technically bullish at the moment. See chart below.
SPY is working so I’ll leave it alone for now.
Summary
Quantitative tightening (QT) is something few investors are paying attention to, in my opinion. Generally speaking, measures taken by Central Banks to drain liquidity is not a positive to stock valuations. QT is not priced into current valuations.
Finally, risk management is what keeps investors in the game. If you adopt bad habits when it comes to managing risk, good things probably won’t happen.
Thanks for reading!
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