December 12, 5:00 pm EST
We talked about the China trade story yesterday.
In a nutshell, Trump has capitalized on an aligned Congress (in the first half of the mid-term) to stoke the U.S. economy. And that has strengthened the leadership position of the U.S. coming out of the decade long post-global economic crisis period.
With that, Trump has used the leverage of global economic leadership (in a vulnerable global economic period) to force change in China. And as we observed yesterday (in the charts of Chinese GDP, industrial production, domestic investment and retail sales), he’s getting movement because the Chinese economy was sputtering before the trade crackdown, and is now running out of gas. Much of the key economic data in China is running at or worse than 2009 levels (the depths of the global economic crisis). We get new data on industrial production, domestic investment and retails sales out of China tonight. This should provide more information on how the Chinese economy is being squeezed.
As for stocks, we have eleven trading days remaining for the year. The S&P 500 finishes today down about 1% for the year, and down 3.4% month-to-date. On the quarter, stocks are down 9% — the worst fourth quarter since 2008. If we look back at monthly returns, dating back to 1950, stocks have finished UP in December 75% of the time, for an average gain of 1.5%. Only two times have stocks has worse December performance over the near 70 year period (2002 and 1957).
And remember, as we discussed earlier this week, it’s not just stocks. It’s a zero (or near zero) return year for all major asset classes this year. Stocks, bonds, gold, real estate … nothing is working. The winner on the year has been cash.