August 8, 2023
Good morning,
A wet blanket was thrown onto Asian and European stock prices overnight as trade data in China confirmed the country is mired in a downturn that it is finding increasingly difficult to shake. S&P Futures are off -.80% pre-market. The S&P 500 Index was up +.90% yesterday – welcome to the summer of choppiness.
The latest PMI data (Purchasing Managers Index) continues to confirm the narrative of a tougher second half for the global economy. The global composite (services and manufacturing) PMI fell for a second straight month in July, down 0.9 points to 51.7, the weakest reading since January. The continuous upside momentum in the first half of the year, which supported global equities, appears to be fading. Markets are challenged by tightening credit conditions, sticky inflation, rising energy costs, and slowing Chinese growth. Some market-based indicators have exhibited early signs of unease this week: the VIX is up 4+ points, credit spreads have widened, and inflation expectations have ticked up.
My personal wiring is contrarian, and I do not like crowds in markets or in the streets. Nevertheless, I am joining the crowd this week and starting a summer vacation tonight. Is it me or is the practice of August vacation at record levels this year? We may be catching Europe. Anyway, your Morning Note will return next Thursday, 8/17. Until then…
Be well,
Mike