Daily Brief Macro: Six Reasons Why This Was Just A Bear Market Rally and more

In today’s briefing:

Six Reasons Why This Was Just A Bear Market Rally
China’s State Capitalism Created Real Estate Excesses and Limits Remedial Options to Reduce Stress
Will Europe Drag the World Into Recession?

Six Reasons Why This Was Just A Bear Market Rally

There appear to be some superficial reasons to support the case for the start of a bull market
An analysis of market internals, valuation and monetary policy backdrop indicates that the bear market isn’t over.
Investors should watch for a re-test of the June lows and make a decision then about downside risk based on sentiment, technical conditions and insider behaviour.

Residential property investment as a % of GDP in China stands at much higher levels compared to the US peak in 2006 before the global financial crisis.
Selling state-owned housing stock in 1988 at artificially low prices created a class of buyers who believed that home ownership was a one-way bet in terms of wealth creation.
Considerable uncertainty prevails about the consequences for mortgage strikers due to lack of personal bankruptcy law in China, The government’s priority is to facilitate project completions to ensure social stability.

It’s finally happened — the euro fell decisively below par against the U.S. Dollar. The weakness can be attributable to a combination of Fed hawkishness and European economic weakness.
European equities are lagging badly on a relative basis, but the relative performance of the other regions is largely unaffected by European weakness.
Investors are advised to avoid Europe, but monitor the region based on the FIFO principle. If European stocks begin to outperform, it could be the bullish signal of global recovery.

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