Fast Fall for how long?
- Clifford Bennett , Chief Economist ACY Securities at ACY
- 29.09.2021 02:45 pm #stocks
Can stocks manage a soft landing?
Fundamental realities begin to bite. People are having trouble getting their heads around the idea that the world's two biggest economies are slowing, and all is not well.
Coming so soon on the heals of economic Nirvana euphoria.
US Richmond Fed Manufacturing Activity Index actually goes into contraction territory. This all while Bond yields resume their inevitable upward march.
US Goods Trade Deficit
The situation now seems to be one of long term entrenchment of a deteriorating scenario. A historical shift to greater defects that may not be so easily reversed.
US Property Bubble
The first chart above is the CoreLogic 20 city average. The second chart is the average family home price changes. While the year on year result is strong, there is clear indication of the pace of price gains having peaked. All other housing industry data rolled Ove several months ago, but prices have continued to stretch higher. As suggest for quite a while now, this is potentially the second great housing bubble of the century occurring right in front of us.
US Inventories
The inventory build in expectation of a strengthening economy has continued. As the broad economic slowing intensifies, this could lead to a stock hangover in the coming months.
Markets are showing significant downfall across the board.
The expectation here, is that there is more to come.
What is important on the day, is to recognise that there are real underlying fundamental reasons for this weakness. Such vulnerabilities exist across the world right now. The UK, supply chain disruption despite opening up. Europe, less political certainty. Suffering the same delta disruption issues. China, slowing and some specific issues as well.
Australia, we had the party, and it was foolish not to expect a hangover.
The stock market is not falling because it "needed to have a correction". This is a significant quantum event, and the risk that it snow-balls over the medium term cannot be ignored.
