The Independent Market Observer

Will Evergrande Take Down China and the World Markets?

September 21, 2021

For those who haven’t heard, global markets slumped yesterday as a Chinese real estate developer, Evergrande, was reported to be approaching bankruptcy. For many, this news brings to mind the great financial crisis of 2008. Back then, a collapsing real estate sector almost took the U.S. and global banking system down, starting with the Lehman Brothers investment bank. Now, the fear is that Evergrande could kick off China’s “Lehman moment.” In other words, many are starting to worry that we could be facing another global financial crisis.

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Monday Update: Retail Sales Beat Expectations in August

September 20, 2021

The focus of last week’s important economic data releases were on consumer inflation, industrial production, and August retail sales. Retail sales increased by more than expected last month, largely driven by a pickup in grocery and online sales. This will be another busy week for updates, including news on the housing sector and the results from the Fed’s September meeting.

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Despite Medical Uncertainty, Economic Outlook Positive

September 17, 2021

This coronavirus update will be shorter than those I have done previously for a couple of reasons. First, there is not much new news. While case growth at the national level appears to have rolled over, other national data is mixed. The case slowdown is by no means certain. Second, the national case data is significantly misleading for many areas, which continue to suffer much higher infection rates than the rest of the country. So, while it is worth taking a look at where we are, the medical situation remains uncertain.

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Is the Market Crazy Expensive?

September 16, 2021

One question I get a lot is whether the market is overvalued. Or, to put the concern the way my son would, is the market crazy expensive? All year, even as the market continued to rise, many people called out high valuations. Now that the market has pulled back, at least for the moment, fears are rising that we may see valuations collapse—and the market with them. Should we be worried?

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Appearance on Fox Business’ Mornings with Maria, September 15, 2021 [Video]

September 16, 2021

Yesterday, I appeared on Fox Business’ Morning with Maria to discuss the markets, inflation, consumer spending, and what’s ahead for the fourth quarter. Listen in to hear more.

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I’m Not Worried About Taxes (Yet)

September 15, 2021

After inflation, which we talked about yesterday, the next biggest set of questions I get focus on what the effect of the new tax law will be and whether the higher tax rates in it will derail both the economic recovery and the market. People generally make a good argument about how it will hurt confidence, take money out of consumer and business spending and investment, and generally take us back to a state of depression. I understand the arguments. But two things are missing that would make them convincing: facts and context.

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Is the Inflation Balloon Close to Popping?

September 14, 2021

One of the most urgent and consistent questions I have been getting recently is around inflation. With the headline numbers high—and they are high—the concern is that we are moving back to the 1970s and that inflation will stay at the current 5 percent or run even higher. That conclusion seems reasonable, given the large federal deficit and spending over the past couple of years. When combined with the signs of slowing growth, it could point back to stagflation. The 1970s are calling. Maybe disco will come back as well?

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Monday Update: Initial Jobless Claims Set New Pandemic Low

September 13, 2021

Last week was relatively quiet in terms of economic updates, with only two major data releases. Initial jobless claims continued to decline to start September, while producer prices increased by more than expected in August. This will be a busier week for updates, with reports to come on consumer inflation, industrial production, retail sales, and consumer sentiment.

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China: Value Play or Value Trap?

September 10, 2021

China’s recent regulatory crackdown and the consequent impact on its financial markets have caught the attention of worldwide media and investors. (A recent post by my colleague Peter Roberto explores the regulatory backdrop.) Given the current environment, I’ve been receiving numerous questions asking if now is the time to double down on Chinese equities. Potential investors are wondering if the recent bounce in some of the hardest-hit stocks could be a sustained run. My belief is that, over the shorter term, headline risks remain elevated for Chinese equities. In the long term, continued economic growth in China may present attractive opportunities for value creation. To avoid potential landmines, however, active management is critical.

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Monthly Market Risk Update: September 2021

September 9, 2021

My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

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