8.8.22: Shall we believe the NVIDIA revenue warning or the Meme Stock rally? What is the better long-term signal?
Key U.S. and China brief market notes by Larry's Analyst Staff Team.
This email is brought to you by Interactive Brokers, one of our preferred brokerages to buy HK-Listed Shares in our China Internet Equity Coverage Universe. If you are concerned about US-delisting of Chinese stocks, we strongly encourage you to explore HK-listed shares on Interactive Brokers.
In our emails, we will provide the following coverage points:
Brief Snapshot of U.S. & China markets and valuation
Our Analyst Team’s Chart in Focus
U.S. & China Upcoming Economic Calendar Snapshot
Notable Chart from Media Outlets
Fear & Greed Index Recap
I hope you find this newsletter to be insightful and enjoyable! - Larry and Team
U.S and China Markets Brief Snapshot 🇺🇸 🇨🇳
(Powered by our Channel Financial Data Provider YCharts)
S&P 500 Index: 4145.19
KWEB (Chinese Internet) ETF: $28.55
Analyst Team Note:
A tug of war between bulls and bears….
As Larry wrote in a note to Patreon members:
“I believe we are near a stage in markets where the bull/bear camp is now quite evenly divided. Former bears are now bulls. New bulls have been empowered by the recent rally. I want to make it clear that I am in the camp where I believe the market has considerable challenges ahead even if there is further room for this counter-trend rally to continue. I am simply holding firm in my LT account. And in my ST account, I continue to use this environment to practice risk-reduction.”
Macro Chart In Focus
Analyst Team Note:
For the markets to find a bottom, what would need to happen? What is the ideal bull case that needs to happen?
Inflation moderates: Inflation breakevens are correctly reflecting that central bank tightening will bring inflation back down near central bank targets.
Central banks moderate: Fed pauses rate hikes. Whether or not the Fed eases policy is less important; the market has historically done well when the Fed is on hold.
Growth improves from 2H22: Global growth is better in 2H than 1H. A better-than-expected outcome in Europe could provide confidence that global PMIs won't fall further and support more confidence that 2023 EPS estimates are achievable. The strong US payroll number was indicative of ongoing US labor market strength.
Balance sheets are resilient: Strong consumer balance sheets in the U.S. and Europe can weather higher rates. Corporates have termed out significant debt maturities. Bank balance sheets are stronger than prior cycles, and lead to more resilience.
Re-risking: Hedge funds start to re-risk from historically low levels of net leverage.
Geopolitical risks ease: 2023 sees less geopolitical tension in Europe, and a fuller reopening of the Chinese economy, providing a boost to global growth and potentially reversing USD strength.
Source: Morgan Stanley
Upcoming Economic Calendar
(Powered by our Channel Financial Data Provider YCharts)
U.S Economic Calendar (Upcoming Data Points)
China Economic Calendar (Upcoming Data Points
Analyst Team Note:
Total outstanding consumer credit increased $40.2b from the prior month, the second largest increase ever. The median forecast was $27b…
A Census Bureau survey conducted in late June and early July found that 4 in 10 adults said it has been somewhat or very difficult to cover usual household expenses. Record number of credit cards opened…
The inflation squeeze continues on… Watch for CPI on Wednesday.
Source: Bloomberg
Chart That Caught Our Eye
Analyst Team Note:
Global food prices are at record highs. In fact, we’ve already seen some civil unrest in emerging market countries over inflation (an eye-opening read).
Unfortunately, the food price shock will likely continue, partially due to India and their role in the rice trade.
India, the world's largest rice exporter, has seen planting areas of the crop decline by 13% due to heatwaves and drought.
India accounts for 40% of the global rice trade, and a decline in production will complicate India's domestic inflation fight. This could result in export restrictions, leading to few supplies for the rest of the world.
Rice feeds half of humanity and is vital for political and economic stability across Asia. Supply disruptions due to potential trade restrictions by India could create shortages and rising prices elsewhere.
Source: ZeroHedge, Bloomberg
Sentiment Check
We want to take a moment to thank Interactive Brokers for being one of our Channel’s trusted Partners and to inform my audience of the special features they have given that our online friends here closely follow Chinese Internet stocks (BABA/Tencent).
Much of Larry’s audience is concerned about the US ADR issue of Chinese Stocks being delisted.
Interactive brokers allows investors to buy HK-listed shares of Alibaba, JD, Tencent, and other brand name Chinese Internet companies on the HK market. This will effectively reduce any confusion or work you will have to do in case there is the event of delisting US ADRs
Our friends from Inside are saying…
