ECONOMIC UPDATE – MARKET OVERVIEW

ECONOMIC UPDATE – MARKET OVERVIEW

As the data prove, and as we have reported, hard facts and figures don’t count. In the 12 months following each of the 40 midterm elections in the U.S., the S&P 500 has gained an average of 15 percent.

On the reality front, expecting declining economic growth, the International Energy Agency said global oil consumption will decline 240,000 barrels a day this quarter compared to last year. 

West Texas Intermediate futures were down 3.5 percent yesterday, closing at $85 a barrel.

Over in China, the world’s second-largest economy and once the powerhouse of economic growth, industrial production grew just 5 percent last month compared to last year and was down from September’s 6.3 percent increase.

Yet, despite the rotten economic news, equity markets spiked on the expectations that Beijing is going to artificially boost the declining housing market with cheap money. The People’s Daily reported that “the central bank will make comprehensive use of its monetary policy toolkits to maintain reasonably adequate liquidity in the banking system, and financial regulators should implement differentiated policies on the tolerance of non-performing loans for small and micro businesses.”

Hong Kong’s Hang Seng index jumped 4.11 percent, the Hang Seng Tech index spiked 7.3 percent, while the mainland Shanghai Composite and Shenzhen Component rose 1.64 percent and 2.14 percent, respectively. 

Again, with retail sales in China falling 0.5 percent thanks to the zero-COVID policy, which we have detailed in this and previous Trends Journals, stocks go up as the economy goes down… and down it goes.

What is becoming a routine, once again the International Monetary Fund, downgraded global economic growth, declaring that the “outlook is gloomier” than previously expected.  

As we have reported, at the start of the year the IMF said the global economy in 2023 would increase 3.8 percent. In July they downgraded 2023 growth to 2.9 percent and last month they dropped it to 2.7 percent saying: “we expect countries accounting for more than one third of global output to contract during part of this year or next.”  

On Sunday, IMF’s research department economist Tryggvi Gudmundsson posted that, “The challenges that the global economy is facing are immense and weakening economic indicators point to further challenges ahead.”  

Stressing that the macroeconomic environment is “unusually uncertain,” he called on the central banks for “continued fiscal and monetary tightening,” saying it is “likely needed in many countries to bring down inflation and address debt vulnerabilities and we do expect further tightening in many G20 economies in the months ahead.” 

Bullshit Has Its Own Sound

Gregory Mannarino wrote this week, in his article titled, “Make No Mistake! Central Banks Will Continue to Inflate. FASTER!” that central banks are not trying to control inflation with their rate hikes; these hikes are just meant to slow demand, and “that’s all—PERIOD.” 

Mannarino’s insights and observations on the damage higher interest rates will cause, who they hurt and help are of trend-worthy importance. 

Currently, while the consumer price index is at 7.7 percent and the Fed’s benchmark interest rate rose this year from nearly zero in March to a 3.75 percent to 4 percent range today… accounting for inflation, interest rates are still deep in negative territory. 

We have also extensively reported that the Fed’s and the European Central Bank’s 2 percent inflation goal is a myth. For nearly two years, central banksters on both sides of the Atlantic have played down the inflation risk, calling it “temporary” and “transitory,” while the mainstream media blackballed those of us who had forecast “inflation is rising” as a reality. (See “TREND TRACKING LESSON: HOW THE TRENDS JOURNAL WAS RIGHT ON INFLATION WHILE FED, BUSINESS JOURNALISTS GOT IT WRONG.”)

Flashing the lower rate hike signal, Federal Reserve Vice Chair Lael Brainard told Bloomberg’s Washington bureau yesterday that she favors raising interest rates a half-point. At the next FOMC meeting in December she predicts “It will probably be appropriate soon to move to a slower pace of increases.” 

“The most recent CPI inflation print suggests that maybe the core PCE measure that we really focus on might be also showing a little bit of a reduction,” she said. “That would be welcome. I think the inflation data was reassuring, preliminarily, just in terms of showing a slowing in categories that I had been anticipating.”

Double Speak

Even though inflation in the U.S. slowed to 7.7 percent in October, the U.S. Federal Reserve is unlikely to halt its steady campaign of interest rate increases, other Fed officials said.

“One month of data does not a victory make,” Mary Daly, president of the Federal Reserve Bank of San Francisco, said in an interview with the European Economics and Financial Centre. 

“This is one piece of positive information,” she added. “We’re looking at a whole set of information.”

The lower pace of price increases “is not close enough in any way” to the central bank’s 2-percent target rate “for me to be comfortable,” she said.

Inflation’s moderation is “a welcome relief,” Dallas Fed president Lorie Logan said. “I believe it may soon be appropriate to slow the pace of rate increases so we can better assess how financial and economic conditions are evolving.”

October’s U.S. consumer price index grew by 0.4 percent, significantly slower than the 0.6 percent Dow Jones had forecast.

The Dow Jones Industrial Average zoomed more than 1,000 points on the 10 November inflation report. The yield on the two-year treasury note dropped 0.3 percent.

Still, inflation remains “unacceptably high,” Loretta Mester, president of the Cleveland Fed, said in a statement last week.

“Despite the moves we have made so far, given that inflation has consistently proven to be more persistent than expected, and there are significant costs of continued high inflation, I currently view the larger risks as coming from tightening too little,” she said.

“Monetary policy clearly has more work to do,” Esther George, president of the Kansas City Fed, emphasized to reporters.

She called for a more “deliberate” approach to lifting rates, adding that “now is a particularly important time to avoid unduly contributing to financial market volatility.”

George and Mester are voting members of the Fed’s interest rate-setting committee this year.

The interest rate futures market adjusted to the new inflation report, pricing in an 85.4-percent probability of a half-point Fed hike in December instead of a three-quarter-point rise.

The market also has priced in a rate cut as soon as next September, a change that Daly said the Fed is unlikely to make.

TRENDPOST: The markets are like racers in the starting blocks waiting for the starting gun to fire: they will leap at the slightest hint of positive news.

Markets will continue to rally on whiffs of positive rumors regarding interest rates and other possible Fed moves.

However, the Fed was overly cautious in beginning to raise interest rates and let inflation get away from it. That behavior suggests the Fed also might be slow in moderating its campaign of rate hikes once the economy clearly stumbles.

Real Inflation

While inflation is not rising as fast as previous months, most of the commodity prices that have gone up are far above where they were before politicians launched the COVID War.

For example, with food prices increasing 10.9 percent in October from a year ago, they have hit the stomach hard. And, the higher the prices rise, the lower the consumer sinks.

As reported today, the shopping warehouse Walmart said the soaring inflation which has hit four-decade highs has changed shoppers’ spending habits, including segments that were once called wealthier customers.

With annual U.S. sales up 8.2 percent in the last quarter at stores open for at least a year, they reported that consumer spending, particularly on groceries, account for more than half of its sales. 

The company said it had “strong grocery share gains,” which account for over 50 percent of their sales, including spending from “high-income households.”

However, on the downside, Walmart said there was “softness in discretionary categories including electronics, home, and apparel.” 

The monthly increase in consumer prices was 0.4 percent, the same as in September.

The core consumer price index, leaving out food and fuel costs, gained 6.3 percent for the month. Energy prices jumped 17.6 percent and food prices added 10.9 percent.

The new numbers “provide early evidence that the [U.S. Federal Reserve’s] campaign to slow rapid inflation may be combining with supply chain healing to ease price pressures,” The New York Times noted.

The good news sparked equity markets’ biggest one-day rally since 2020, which we detail in “Last Week: Markets Soar on Inflation News” in this issue.

“The stock market surge was not driven by concerns over the impossible situation facing workers, whose living costs are exploding while their real wages stagnate or decline,” the World Socialist Web Site (WSWS) pointed out.

Markets “shot up because billionaire investors see in the inflation report the possibility of a return to easy money that existed prior to the Fed interest rate hikes that began early this year,” it added.

However, the Fed has made clear that it is not done raising interest rates, as we report in “Fed Officials Will Raise Rates Further Despite Inflation Slowing” in this issue.

Despite October’s good news, the price of food at work and school has gone up 95.2 percent this year and food at home 12.4 percent. Bread is up 14.8 percent. Airline tickets cost 49.2 percent more than in December 2021 and the cost of public transport has gained 28.1 percent since then, the bureau noted. New car prices rose 8.4 percent, year on year.

Menu prices at restaurants have added 8.6 percent since 2021.

Health insurance premiums have grown by 20.6 percent, gasoline pump prices have risen 17.5 percent, and electricity 14.1 percent. 

Housing costs grew 0.8 percent in October from the previous month, the largest monthly increase since August 1990, according to The Wall Street Journal

However, the price of used cars dipped 2.4 percent in October from September and electronics prices also moved down ahead of the holidays.

The price of televisions fell 16.5 percent, year on year, smartphones 23 percent, and computers and similar devices 3.1 percent.

Bad to Worse

While The Street brags about declining inflation, on Main Street the pain has hit the consumer pocket book very hard.

Today the Federal Reserve reported that in the third quarter household debt spiked at the fastest pace in 15 years as more consumers built up credit card debt and are saddled with heavy mortgage balances.

Up 2.2 percent from the previous quarter and 8.3 percent from a year ago, third quarter debt increased $351 billion racking up its highest quarterly increase since 2007. To date, the household debt is at a record high of $16.5 trillion. 

TREND FORECAST: Again, while The Street centers on America, inflation continues to spike in Europe, driving up gas and oil prices to record highs as we have thoroughly reported in The Trends Journal.

And as we have noted, the price spikes are primarily a result of the sanctions the United States and NATO imposed on Russia which used to supply Europe with 40 percent of its gas.

Now, as we go to press, a bad situation has become worse. Earlier we reported how oil prices were down because demand in China was decreasing along with their economy. Now, oil prices are back on the rise following a report that Russian missiles that were fired into Ukraine hit a border town in Poland, killing two people. 

Meanwhile, Russia has destroyed much of Ukraine’s energy facilities launching its biggest barrage of missiles since their 24 February invasion, which as we reported has caused widespread blackouts in well over half of Ukraine.

Again, the month-long barrage of missile attacks by Russia into Ukraine were in retaliation for the blowing up of its Nord Stream pipelines. (See “WEST BLAMES RUSSIA FOR BLOWING UP ITS NORD STREAM PIPELINES.”)

We note this since there are numerous wild cards, as with the alleged Russian missile strike that hit Poland which, should military tensions escalate, will alter socioeconomic and geopolitical forecasts… that will have adverse effects on equity markets.

And, the greater the escalation of what we have noted is the beginning of WWIII, the higher gold and silver prices will rise since, as we note, they are the most precious of precious safe-haven assets. 

LAST WEEK: MARKETS SOAR ON INFLATION NEWS

The looming bankruptcy of crypto giant FTX rattled markets, sparking a midweek sell-off.

Then, after Thursday’s Bureau of Labor Statistics report that October’s U.S. inflation rate had fallen to 7.7 percent from 8.2 percent the month before, stock and bond markets rallied and booked their biggest gains in months.

Investors felt hope that inflation’s slower pace means the U.S. Federal Reserve may raise its interest rate less than expected when it meets next month and could pause rate hikes altogether at some point in the not-too-distant future, The Wall Street Journal said.

The Dow Jones Industrial Average ballooned by 4.1 percent for the week. The Standard & Poor’s 500 index added 5.1 percent to post its best weekly showing since June.

The NASDAQ rocketed up 8.1 percent, its best week since March, buoyed by a rally in tech shares.

Alphabet and Amazon’s prices each boomed by almost 11 percent on the week. The ARK Innovation Exchange-Traded Fund, considered a speculative play, shot up by 15 percent.

On Thursday, two- and 10-year treasury note prices saw their best single-day gains in more than 10 years. The 10-year’s yield dropped to 3.828 percent, marking its sharpest one-week drop since 2020. Yields fall as prices rise with demand.

The bond markets were closed Friday on Veterans Day.

The dollar slid more than at any time since 2009 during the Great Recession, beginning the week above 1.11 against a collection of other major currencies and ending slightly above 1.06.

Markets were desperate for good news, even if it might be temporary.

“We believe that the stock and bond markets have found a bottom,” Jay Hatfield, a portfolio manager at Infrastructure Capital Advisors, told The Wall Street Journal.

Not everyone was ready to second that assessment.

“It certainly is our first hint that inflation could be moderating,” Dev Kantesaria, founder of Valley Forge Capital Management, said to the WSJ, “but with economic data, there’s always the chance of head fake.”

Gold soared 5 percent from $1,680 to end the week at $1,770.

Brent crude rose 2.5 percent to $95.99 on news that China will ease its rigorous program of quarantining travelers and mass COVID testing, hinting that Beijing may loosen its policy of strict anti-COVID lockdowns.

West Texas Intermediate, the benchmark for U.S. domestic oil prices, slipped 2.6 percent to $88.99.

Bitcoin dropped more than 18 percent to $16,788 at 5 p.m. on 11 November, sinking through Tuesday and Wednesday as troubles mounted for FTX, the crypto pillar that crumbled into bankruptcy last week.

Overseas, the London FTSE index edged down 0.1 percent, while the pan-European Stoxx 600 jumped 3.7 percent in tandem with U.S. markets’ gains.

In Japan, the Nikkei 225 also rose, gaining 3.3 percent. South Korea’s KOSPI leaped up 5 percent on hopes that lower U.S. inflation will goose the Asian nation’s export-dependent economy.

In China, Hong Kong’s Hang Seng index rocketed up 7.4 percent. On the mainland, the CSI Composite managed a 0.9 percent gain and the SSE Composite ticked up 0.8 percent.

YESTERDAY: STOCKS START WEEK IN NEGATIVE TERRITORY WITH FOCUS ON FED 

The Dow Jones Industrial Average fell 211.16 points on Monday, or 0.6 percent, to 33,536.70, and the S&P 500 was also down 0.89 percent to 3,957.25. The Nasdaq Composite was also down 1.12 percent to 11,196.22.


Stocks were coming in hot after a strong previous week that saw the S&P up 5.9 percent.

Investors were trying to digest mixed messages from top officials in the Federal Reserve. On Sunday, Christopher Waller, the Fed governor, said in an interview that the market seemed a little too optimistic and that more rate increases could be coming down the pipeline. 

But his comment was followed up yesterday by another Fed official who indicated that the central bank may ease its monetary tightening.

The two-year Treasury yield ended the day at 4.406 percent and the 10-year yield rose 3.865 percent.

Elsewhere, London’s FTSE was up 67.13, or 0.92 percent, to 7,385.17 and the STOXX 600 was up 0.60, or 0.14 percent, to 432.86. In Asia, Tokyo’s Nikkei was down 300.10, or 1.06 percent, to 27,963.47, and South Korea’s Kospi was down 8.51, or 0.34 percent, to 2,474.65. 

Hong Kong’s Hang Seng was up 294.05, or 1.70 percent, to 17,619.71. China’s Shanghai Composite was down 3.89, or 0.13 percent, to 3,083.40, and the Shenzhen Component fell 0.24 percent. 

TRENDPOST: The Trends Journal had forecast that the combination punch of COVID War and subsequent lockdowns, and the sanctions put in place against Russia have and will continue to affect the global economies. 

Over in Japan, the world’s third largest economy, for example, despite the government pumping in trillions of yen to artificially pump up the economy and equity markets, third quarter GDP contracted at an annualized rate of 1.2 percent.

In the U.K., the property market saw real estate prices drop up to 30 percent while “new home buyer inquiries” in October to the lowest level since the Panic of ’08.

Jeremy Hunt, the British finance minister, announced that he will raise taxes to help the country regain its financial footing. The Bank of England has warned of a looming recession.

“I think it’s very likely … the question is not really whether we’re in recession, but what we can do to make it shorter and shallower,” Hunt said in the interview, Reuters reported.

OIL: Brent crude fell $2.85 to $93.14 a barrel on Monday and West Texas Intermediate fell $3.78, to $85.18 a barrel. 

It was a bumpy day in the oil market over China’s ‘zero-COVID’ policy and its impact on the global economy and oil demand. The U.S. dollar’s strength also impacts the price of oil. 

The oil market is preparing for the EU’s sanctions that will ban seaborne Russian crude oil imports beginning 5 December, which will likely cause Brent crude’s price to pop. 

Some economists see oil prices returning to the $120-per-barrel range and stay in that range for years.

TREND FORECAST: Oil prices face several issues ranging from China’s COVID-19 lockdowns, the Ukraine War, rising interest rates, slowing economies, and geopolitical tensions.

The longer the Ukraine War rages and the deeper the sanctions that are imposed on Russia, the higher gas and oil prices will rise.

GOLD: The precious metal was trading Monday at around its three-month high—about $1,770.70 per ounce on hopes that the U.S. Federal Reserve will ease its monetary tightening after comments from Lael Brainard, the Fed’s vice chair.

Brainard helped gold prices when she said in an interview that the Fed will likely raise interest rates by 0.5 percentage point instead of a 0.75 percentage point increase. 

“By moving forward at a pace that’s more deliberate, we’ll be able to assess more data and be better able to adjust the path of rates to bring inflation down,” she told Bloomberg. 

TRENDPOST: As we have forecast, gold prices have hit their lows recently and are on the rise. Gold is a hedge against high inflation, but it becomes less attractive to investors when there are high interest rates. The U.S. central bank has raised rates in the U.S. to 3.75 percent and 4 percent, but now there is more talk of easing rates, thus gold prices are rising. 


The 30-year Treasury yield rose 0.013 percentage point to 4.057 percent. 

The U.S. dollar came off its largest single-week decline in 2022 last week but rose Monday against the euro to $1.0329.  

BITCOIN: Crypto traders are still trying to figure out what’s next after the swift collapse of Sam Bankman-Fried’s FTX as a run on deposits resulted in his exchange being short $8 billion. His $32 billion company was once one of crypto’s biggest players. The New York Times noted that the 30-year-old was once considered a wunderkind—this generation’s John Pierpont Morgan.

At heart of the turmoil are questions as to whether or not he misused customer funds to maintain another venture called Alameda Research.

The crypto world is sensitive to any traces of mistrust and, after 2022, does not need another jolt. We have noted that bitcoin is down about 65 percent on the year, and was trading Monday at around $16,500.

TRENDPOST: Our subscribers know that cryptos generally react negatively to interest rate increases and a soaring U.S. dollar. But one of the biggest concerns among crypto traders is the possibility of government regulation. 

Changpeng Zhao, the head of Binance, another crypto exchange, said there is currently a lot of risk. 

“We have seen in the past week things go crazy in the industry, so we do need some regulations, we do need to do this properly,” he said. 

TODAY: TRADERS EMBRACE LATEST INFLATION DATA, SHAKE OFF REPORT OF RUSSIAN MISSILE STRIKE IN POLAND 

World War III? Who cares, all eyes on Wall Street continue to be on the Federal Reserve’s next move to bring down inflation. 

The Dow Jones Industrial Average was up 56.22 points, or 0.17 percent, to 33,592.92, and the benchmark S&P 500 was up 34.48, or 0.87 percent, to 3,991.73. The Nasdaq Composite was also up 162.19, or 1.45 percent, to 11,358.41. 

The Street has been abuzz this week after hints from central banksters that they may slow interest rate hikes when they meet next month, and the producer price index for October may solidify that forecast. The PPI increased by 0.2 percent, which was lower than the 0.4 percent increase that was anticipated by economists.

TRENDPOST: The market has been overreacting to any positive sign when it comes to inflation, even a 0.2 percent PPI increase instead of a 0.4 percent increase. Expect the Fed to ease its monetary tightening, but not because of these numbers. 

Gerald Celente has said the market is rigged for the Bigs to get Bigger at the expense of the Middle Class.

The two-year Treasury yield was down today to 4.359 percent, the 10-year Treasury yield was down to 3.798 percent and the U.S. Dollar Index was down 0.13 percent to 106.52. The greenback’s high this year was 114.78, and has come back down to Earth in recent trading. 

Investors will be monitoring Target’s earnings report due out tomorrow to get a sense of how Americans are spending their money. The Wall Street Journal noted that Target’s stock is down 23 percent on the year.

Elsewhere, London’s FTSE was down 15.73 points, or 0.21 percent, to 7,369.44, and the STOXX 600 was up 1.58, or 0.37 percent, to 434.44. In Asia, the Nikkei was up 26.70, or 0.10 percent, to 27,990.17 and South Korea’s Kospi was up 5.68, or 0.23 percent, to 2,480.33. China’s Shanghai Composite was up 50.68, or 1.64 percent, to 3,134.08 and the Shenzhen Component was up 237.87, or 2.14 percent, to 11,351.33. 

OIL: Brent crude was trading up slightly today after reports emerged that a Russian missile may have exploded in Poland, a NATO member, killing two. Brent was up 45 cents a barrel, or 0.48 percent, to $93.59 and West Texas Intermediate was up 78 cents in the afternoon, or 0.91 percent, to $86.66 per barrel. 

Oil increased today due to a weakening dollar and the report of the accidental Russian missile strike in Poland, which could mean a wider conflict. The Trends Journal monitored a State Department press briefing today and it appears the U.S. is not rushing to invoke NATO’s Article 5, despite urging from Ukrainian Twitter accounts. Russia has called the strike a “provocation.”

TRENDPOST: Oil continues to be a “wildcard,” because there are so many geopolitical uncertainties. Both Brent and West Texas Intermediate saw their prices increase after reports of the missile strike. Poland said it is holding an emergency security meeting. Warsaw has been one of the most vocal critics of Russia, and has been blamed by the Kremlin of playing a role in the Nord Stream pipelines sabotage. 

GOLD: The precious metal was up $6.50 per ounce today, or 0.38 percent, to $1,783.80, after new data showed inflation cooling in the U.S. 

The producer price index for October came in at 8.0 percent compared to what economists anticipated to be an increase of 8.3 percent. The data lends even more weight to the forecast that the Fed will take its foot off the gas with interest rate hikes, which bodes well for gold prices.

“The PPI read certainly adds more fuel to the fire for those who feel we may finally be on a downward inflation trend,” Mike Loewengart, the head of model portfolio construction at Morgan Stanley’s Global Investment Office, told CNBC.

TREND FORECAST: With no sign of the Ukraine War ending, amid a global slowdown, gold will continue to be a valuable safe-haven asset to any portfolio. Like any asset up against a strong dollar and higher Treasury yields, the precious metal will not have a clear path to higher value, but it will soar when the Ukraine War expands and officially becomes a world war, which seems to be approaching after the missile strike in Poland.

BITCOIN: The world’s most popular crypto currency seemed to stabilize today after a few days of soul searching by investors. Bitcoin was up $416.40, or 2.51 percent, to $17,013.30 per coin.

Investors are still trying to regain their equilibrium after the swift collapse of FTX, the popular exchange.

Glassnode, the blockchain analytics firm, told Yahoo! Finance that bitcoins have been pulled from these centralized exchanges at a “historical rate.”

“The failure of FTX has created a very distinct change in #Bitcoin holder behavior across all cohorts,” the company said. 

Linen noted that these self-custody wallets means the crypto owner has the sole possession of their digital money or other digital assets “because you control the private key.” 

“You have the responsibility to safeguard access to your private key because it is not stored anywhere else. You have access to your funds 24x7x365 instead of relying on a financial intermediary,” the website read.

TRENDPOST: The Trends Journal’s position has been that the cryptocurrency will continue to face headwinds as the U.S. dollar value remains persistently high along with Treasury yields. The collapse of FTX seems like a prime opportunity for government regulation over these cryptos, which would tank their value even more than what we’ve seen this past year.

Cryptos are based on trust, and every time there is an exchange collapse, the average investor will think again about taking the investment risk.

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