Markets

(New York)

Here is potentially good news for investors—the market’s start to this year has been the best since 1987. Both the S&P and Russell have risen considerably in the first 12 sessions of the year, with the former jumping 8.8%. The best start since ’87 sounds good, except that 1987 rivals 2008 as having the worst reputation with investors (shares fell almost 23% in a single day in October 1987). Analysts are urging caution, especially on small caps, as the gains don’t seem sustainable given the huge buildup in leverage that has occurred in small companies over the last few years.


FINSUM: The parallel to 1987 is completely irrelevant, as it is really only based on the percentage gain over 12 sessions.

(Beijing)

Markets are taking bad news out of China hard. New data out of Beijing shows that the country’s exports dropped sharply in December. The figures suggest a global slowdown, and a brutal trade war with the US are taking their toll on the Chinese economy. Exports fell a whopping 4.4%. China also held a $323 bn trade surplus with the US, the largest since 2006. Imports fell 7.6%, showing how much the slowdown in China was affecting demand. Car sales in in the country also declined for the first time since 1990.


FINSUM: The tariffs are working, but there is a larger issue at stake—the US and the world’s relationship to China. There is a lot of strain being put on the country, and we are concerned about how the government there will react.

(Washington)

The Fed is facing a herculean task, argues the Wall Street Journal. That task is to keep inflation at its target, while also steering a moderation in growth. In other words, how does the Fed keep inflation in check without causing a recession? One way to consider this challenge is to think about how the Fed may approach it: “focus more on the domestic economy and keep nudging interest rates higher to combat inflationary concerns, or pay greater attention to stresses abroad and in the markets, and hold rates steady or even nudge them lower”, says the WSJ.


FINSUM: We think this is not as hard as rumored. Our view is that the Fed should freeze rate hikes and broadcast that a long-term freeze is the plan. That should put the economy (and markets) on solid footing, and keep things from getting too out of hand.

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