GLOBAL ECONOMICS AND POLITICS

Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.

 

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MARKETPLACE VEHICLES: GOING MOBILE © Leo Haviland, December 13, 2017

The Cars ask in their song “Drive”:
“Who’s gonna tell you when it’s too late
Who’s gonna tell you things aren’t so great”?

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CONCLUSION AND OVERVIEW

To the majority of Wall Street marketplace observers, price fluctuations for at least the past few months in many key benchmarks such as the United States government 10 year note, the broad real US trade-weighted dollar, and the S+P 500 generally have seemed relatively peaceful. Many players are rather complacent. However, history reveals that the relative lack of dramatic movement (“volatility”) according to such perspectives of course does preclude greater and ongoing violent future swings. Though the outward landscape of the given financial realm may seem calm, powerful intertwined and shifting forces may lurk beneath, perhaps eventually and possibly suddenly causing substantial tremors in one or more economic (and political) domains.

Confidence yardsticks for US consumers and small businesses are high. American unemployment has slipped substantially in recent years. Yet the fierce political conflicts around the globe between assorted camps, including various right and left wing populist crews and diverse establishment (elite) groups, hint at and probably reflect strong, entangled, and contending variables in economic spheres. The long-running accommodative monetary schemes by the key global central banks such as the Federal Reserve Board, European Central Bank, Bank of England, and Bank of Japan reflect not only their devotion to their interpretation of their beloved legislative mandates. Sustained marketplace manipulation programs such as yield repression and money printing (quantitative easing) also aim at sparking and sustaining economic outcomes favorable to (or at least protective of) the economic and political interests of “the establishment”. Central banks do not want the establishment’s boat to get rocked too much or capsize!

In America and many other regions around the world, sharp cultural divisions involve more than just economic (or “class”) quarrels and concerns regarding financial opportunities and mobility. Partisan feuds involve politics, whether Democrats versus Republicans, liberal versus conservative, the quality of the current Presidential leadership, and so on. Yet fervent debates and frequent anger on Main Street regarding issues relating to race/ethnicity, sex/gender, age, religion, geography, the environment, and so on probably reflect economic (political) splits and consequently hint at the potential for marketplaces to become inflamed.

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In any case, the US Treasury 10 year note and the broad real trade-weighted dollar (“TWD”) are two important marketplace vehicles currently near critical levels. The key US 10 government note height is around 2.65 percent, that in the TWD around 96.2 to 96.6. A sustained rise in the UST above that level or a decisive TWD breakdown under 96.0 (and especially if both events occurred) might reflect and probably would increase price volatility in those fields. Such significant moves in rates and the dollar probably also would spark a substantial reversal of the current bull trend in the S+P 500 (and related advanced and emerging marketplace stock arenas). Commodities “in general” in this scenario likely would decline as well.

The enthusiastic “buy the dips” chorus for US equities likely will not remain forever fashionable or successful. What happens if the American Congress does not enact tax “reform” in the near future? Suppose observers focus more closely on the long run US federal budget deficit and debt issues (and debt problems in China, Japan, and elsewhere)? What if US corporate earnings do not sustain notable growth? Will such events (or a US dollar decline; or higher interest rates or central bank threats of these; or some other phenomenon such as trade wars, the North Korea nuclear issue, or further petroleum price rallies) help to stop the train of the glorious long bull market trend for the S+P 500?

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FOLLOW THE LINK BELOW to download this article as a PDF file.
Marketplace Vehicles- Going Mobile (12-13-17)
Charts- Trade-Weighted US Dollar and UST 10 Year Note (for essay Marketplace Vehicles- Going Mobile, 12-13-17)

TREND RELATIONSHIPS: US AND CHINESE STOCKS AND THE INTERNET SECTOR © Leo Haviland, November 27, 2017

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“Away from baseball, I had a lot of fun, and much of it came in pitting myself against the odds found in the financial world, which are somewhat longer against success than getting a base hit.” The Hall of Fame star Ty Cobb, “My Life in Baseball”

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The price movements and levels of various leading “internet-related” stocks attract the attention of and story-telling by assorted stock marketplace strategists and media guides around the globe.

Attached are several charts.

Charts 1-5 constitute America’s FAANG army (Apple, Amazon, Facebook, Google, and Netflix). Charts 7-9 cover the large Chinese internet groups labeled BATs (Baidu, Alibaba, and Tencent). Although these bar charts are weekly, the handwritten price and date noted is for the actual trading day.

During the past two and a half years, a review of the dates and lines noted on the graphs of this array of internet companies manifests a similarity “in general” (for the group) as to noteworthy price trend shifts (or accelerations) “around” several critical marketplace turns. These key time points include: mid-2015 high; late August 2015 low; late year 2015 drop-off; first quarter 2016 bottom; dramatic rally after the 11/8/16 election.

Not every stock necessarily closely fits the given key turning point noted, but the majority did. Of course not all travelled the same percentage distance. Nevertheless, there has been some tendency for the group members to “confirm” each other’s trend.

Sometimes a given stock, stock sector, or broad marketplace may lead (lag) another (the convergence/divergence issue).

This trend and timing linkage for the FAANGs and BATs provides guidance for anticipating and evaluating movements in broad indices such as the S+P 500 and China’s Shanghai Composite. United States and Chinese benchmarks do not always voyage together, but they have frequently done so (see the notes on chart 1).

The internet sector and broad equity stock indices are not necessarily divorced from movements in other stock sector domains (such as “financial” or “retail”) and their members. Many scouts closely monitor noteworthy financial corporations such as Goldman Sachs. The GS chart is at page 6 (unlike the other eight graphs, this one is monthly).

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A noteworthy decline in this internet stock group “in general”, whenever this happens, probably will occur around the same time. Given the widespread importance and allure of the internet playground (and the “technology” territory), such an important sectoral shift by the FAANGs and BATs likely will develop around the time of one in the S+P 500 and Shanghai Composite (and perhaps for other related broad stock indices of advanced and emerging/developing nations as well). As always, watch for price leads (lags). For the S+P 500, given its glorious long-running bull move, a decline of about ten percent (or more) would worry many observers.

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Keep an eye on rising interest rates for (and other signs of tighter credit in) the United States and China (and in other key nations). What if the United States does not enact tax “reform”? A significant portion of the rally in the overall US stock marketplace since the November 2016 election probably has derived from optimism regarding the passage of a massive tax cut package (particularly for corporations). Yet watch debt trends in America (especially if the so-called reform becomes law) and China. The adventures of the broad real trade-weighted dollar, especially if it breaches important support and resistance levels, also intertwines with and can significantly influence trends in stocks, interest rates, and commodities.

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FOLLOW THE LINK BELOW to download this article as a PDF file.
Trend Relationships- US and Chinese Stocks- the Internet Sector (11-27-17)
Charts- Trend Relationships- US and Chinese Stocks and the Internet Sector (11-24-17)