STOCK INDEX AND INDUSTRIAL COMMODITY FUTURES REBOUND
After a dismal performance in December stock index and some industrial commodity futures markets have put in a stellar performance in January in spite of a variety of negative economic news and the ongoing U.S.-China trade rift.
However, in spite of these negatives, stock index futures and other markets, including many industrial commodities, such as copper and crude oil have performed very well.
Chart 1: S&P 500 Futures
Stock index futures and industrial commodities performed well in spite of Chinese economic data that was weak and appears to be getting weaker. China’s economy, the world’s second largest, grew 6.6% in 2018, which is the slowest annual rate since 1990. The economic downturn was more severe in the last months of 2018, with fourth quarter growth increasing 6.4% from a year ago.
It could be viewed as a sign of strength for stock index futures when they were able to rally in spite of news that analysts lowered their fourth quarter earnings forecast for S&P 500 companies to 14.2% year-to-year growth from 20.1% that was estimated
Source: WeeklyChart from QST
Stock index futures and industrial commodities advanced in price even when the World Bank said it sees growth in the global economy decelerating to 2.9% this year compared to 3.0% in 2018 due to elevated trade tensions and international trade moderation. In addition, a slump in the global economy will continue in the coming year, with 2020 growth estimated at 2.8%. Growth in the U.S. is likely to slow to 2.5% this year from 2.9% in 2018, while China is expected to grow at 6.2% in the year compared with 6.5% in 2018, according to the World it lost speed during the year and the ride could get even bumpier in the year ahead.”
Other stock index futures are performing well at a time when the news would have suggested lower prices. One example of this is the Shanghai Composite index. Much of last year the index had been consistently losing ground to U.S. stock indexes. However, in January the Shanghai Composite has performed very well.
GROWTH IN THE U.S. IS LIKELY TO SLOW TO 2.5% THIS YEAR FROM 2.9% IN 2018.
22 | ADMISI - The Ghost In The Machine | January/February 2019
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