April 8, 5:00 pm EST
As we discussed on Friday, the overhang of risks to markets, to the Trump administration and to the economy are as light as we’ve seen in quite some time.
With this in mind, we have a fairly light data week – which means the likelihood of a disruption in the rise in stocks and risk appetite remains low.
We get some inflation data this week, which should be tame, justifying the central bank dovishness we’ve seen in recent months. The ECB meets this week. They’ve already walked back on the idea that they might hike rates this year. Expect Draghi to hold the line on that. The Chinese negotiations have positive momentum, with reports over the weekend that talks last week advanced the ball. And we have another week before Q1 earnings season kicks in.
So, expect the upward momentum to continue for stocks. Just three months into the year and stocks are up big, and back near record highs in the U.S.. The S&P 500 is up 15% year-to-date. The DJIA is up 13%. Nasdaq is up 20%. German stocks are up 13%. Japanese stocks are up 11%. And Chinese stocks are up 32%.
Remember, we’ve talked about the signal Chinese stocks might be giving us, putting in a low on the day the Fed did it’s about face on the rate path, back on January 4th.
The aggressive bounce we’ve since had in Chinese stocks appears to be telegraphing the bottoming in the Chinese economy. That’s a big relief signal for the global economy. Commodities prices are supporting that view (sending the same signal). Oil is now up 42% on the year. And the CRB industrial metals index is up 24%.
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