Far East Capital Newsletter
Charting and fundamental views differ somewhat
14 Apr 2019

In This Issue

Charting and fundamental views differ somewhat

Chartists will look to patterns from the past in order to draw predictions about what will happen next. Sometimes it works and sometimes it doesn't. The latest commentary out of the US is that the recovery of the S&P in recent months, since the low on December 26th, is an outlier in historical terms. What started out as a bear market rally has been so strong that the pendulum is swinging in favour of viewing it as a resumption of the bull market. The chartists advice is to avoid short positions, as there has never been such a strong bear market rally in history - so stop viewing it as a rally.

The fundamentals outlook for the US economy is better than it was late in December, owing to the Fed taking a less hawkish approach to interest rates. It seems like it was listening to the early warnings given by lead indicators and it has backed off, meaning the argument for a lower stock market has less merit. Though, does that automatically mean that things are great again, or is it that they won’t be as bad as what was earlier feared? Remember that whatever is said today, by economists or chartists, is subject to constant review owing to changes that occur tomorrow in response to reactions to what is forecast today. It is the ultimate moving feast that is forever subject to change.

The global economy has entered a synchronised slowdown, according to the Brookings Institution think tank and the Financial Times. The IMF is cutting its growth forecasts and the WTO continues to express caution to the trade skirmishes. Italy has fallen into recession, Germany has just managed to avoid one by the skin on its teeth and the stimulatory influence of Trump's tax cuts are starting to fade. China is tickling the throttle as it tries to prevent further softening. 

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