Blain's Morning Porridge - Stock Markets up $10 Trillion this year.. more to go? And what shall
Blain’s Morning Porridge – June 2nd 2017
“I will have the steak.” “And what about the vegetables Prime Minister?” “Oh, they’ll have the same as me..”
Key event today is US Payrolls – and are they going to surprise us? Yesterday’s strong manufacturing data and private sector jobs growth makes us think an upside shock – with a number over 200k – might be on the cards.
What does that mean? Depends if you are an optimist or a pessimist. A strong number can be spun many ways: i) the US recovery is strongly on course, ii) lots of mac-jobs are being created but the economy is not benefiting, or iii) the strength of the report shows the US economy running into capacity problems. Get over it.
With the US economy looking oh so rosy, what’s to worry about? Oh bonds? That is such a last year worry… the FED raising interest rates looks nailed on.. but bonds still look robust and in the same range since the sell off last year! Why is that when the global ecomony is so strong and stocks so bid highers?
Er.. there is always that small kernel of doubt at the back of the mind…
As the Nikkei charges up through 20,000, a number of blogs this morning talk about how wonderful the global stock market picture is – up over $10 trillion this year to a global market cap of $74 trillion! That’s getting close to 100% of Global GDP (circa $78 trillion!) What’s not to like about what my Macro colleague Martin Malone calls Goldilocks: low supportive interest rates, strengthening and synchronous economic growth, and positive output gaps are set to push equities yet higher.
In 2007 the Global market cap of stock markets hit 115% of Global GDP – suggesting stocks still have upside left in them. Martin says “Road bumps are likely along the way; but another $10 trillion on equity valuations should not surprise…”
The great thing working for a firm like Mint is we can differ in our views – it leads to lively discourse. Much as I think Martin is the smartest most logical economist on the block, markets are also about sentiment. I just don’t buy stock markets into infinity. I’ll stick with my “money is too cheap so the economy is too good” Doom and Gloom view. Why? Because I’ve seen this before…
And talking of speed bumps… I suppose Donald Trump could be used for that purpose.
Isn’t it just wonderful that one American can so truly unite and unify global public opinion? Just not in a good way. He’s pretty much not actually achieved much except making a lot of noise and peeving oh so many people.
Why does he trigger such reactions? Because he’s unabashed about naked national self-interest. ie: “The Paris accord would undermine our economy, hamstring our workers, weaken our sovereignty, impose legal risk on us and permanent disadvantage to other countries” is a statement of unabashed FROAD to the rest of the world. US voters love it. We have to get used to it. It’s just the way he/they is/are.
As one note reminded me this morning the US and Syria now stand firm together in their non- membership of the Paris Agreement. I got sent a very earnest article from some US right wing rag arguing that with-drawl from Paris is the best thing ever to happen to the US environment movement. As I’ve said before – you can justify about anything with the right propaganda tools.
So let’s add Mother Earth to the President’s fan club. Alongside Obama-care, Nato (pay up or suffer my divine rath), Germany, global trade, etc. Just about the only folk he’s not actually p*ssed off are the North Koreans… but that’s the way he plays. Intimidate everyone else to show how tough he is.
I’m not entirely sure about global warming myself. Maybe it’s real or maybe it’s just ongoing climate variation – I did a lot some work at university on the economic consequences of a mini-ice age in the 16th century triggering an economic boom in Europe that fuelled The Reformation and The Englightenment. But I do know the environment is the only one we got – and if we break it.. we’re done.
Meanwhile, back on this little island at the unfashionable end of Yoorp.. I despair of the current election. It looks like the Tories will get some kind of workable majority, and Jeremy Corbyn (aw.. bless) will go down to honourable defeat. However, its also looking very unlikely we’ll be troubled by Theresa May as “Leaderene” for much longer.. which begs the question if Boris, Amber or whatever other curious beast succeeds her will decide they should also go to the country..
On that unhappy prospect.. Have a great weekend!
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Bill Blain