US economy and weakness Chinese Reminbi

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Financial Markets are down seriously. These are very difficult markets now.
Will this be a sign of an upcoming recession or are we already in the middle of a recession?

Stocks are under more pressure and bond yields are the lowest in years.
The August and January selloff in the Chinese markets was the result of the very low transparency in the Chinese financial markets.
This is bad for the Renminbi. In this month China faced a huge flow out of capital USD 185 Bilj. It could be a high risk China is losing control of their currency. This is really bad for the Emerging markets. ( commodity, oil, markets in mineur)

In the US, corporate earnings and prices always lead the fundamentals. The 2016 economic growth will be +2,7%, the unemployment will be lower at 4,7%, the wage growth at +3% and the inflation about 2%.
This is not really recession. The recent January payrolls in the US are again up with 205.000. At least the FED must avoid deflation.

Should we start to think about buying stocks? Yes, think; but not yet execute.
The markets need more guidance for positive change. The People’s Bank of China (central bank) must restore its credibility.
Nevertheless I think earlier bad news is already baked into the market, I stay cautiously upbeat equities.
However such a negative sentiment is not justified. Things are better than the markets shows.
Look for Google(Alphabet) , Starbucks, Amgen, Visa. All companies with growing figures.

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Bart Van Wagenberg

Bart Van Wagenberg

Senior Portfolio Manager
Bart Van Wagenberg

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