Global markets are now in a chorus line with US, China, and emerging markets back in sync just as we welcome spring. With a slew of good news, investor confidence is revived with optimism from around the globe which seems to continue to support the rally in the equities market. Further, since no “War” [other than some pointed comments] has commenced in that so-called “trade war” with China after that Trump tweet of 12 months ago – we can remain contented and reflect that relations are now likely to improve.
Yes, after 12 months - the US and emerging markets are in harmony once again and are trending higher. CNN, BBC, and global news networks are filled with remarkable discussions on how improvements in the global equities markets are energizing investors all over the world and that we are looking to new highs this spring.
All thanks to a synchronized and concerted effort by major central banks to orchestrate a tune that money is cheap and markets are going to be awash with easy cash to buoy it higher. It’s perfect timing for elections in the US and Europe as well.
In the US alone, Trump would usually brag that the markets agree with him. With the S&P500 index (SPX) gaining 15% to date this year and with the ICE Merrill Lynch US high yield index rising by nearly 8% - the market is Trump’s best friend. How can you argue that the economy is in dire straits if the market is on another extended rally?
On the other side of that “trade war,” China’s stock market is also seen with signs of renewed energy and strength – as if fears of a US-China trade disagreement have already been factored in and discounted in the Chinese markets. The most improvement is coming from China’s manufacturing sector - a somewhat ironic presumption if the trade wars are going to take the business out of China. It hasn’t.
So, what is really going on? At the end of the day, politicians will always look into that memorable Clinton revelation that goes, “It’s the economy, stupid!” Indeed, politicians in the world’s major economies have to calibrate the national barometers that indicate that everything is okay: that the US is okay; that China is okay; and that the EU is getting better - more a prayer than a fact. What better way to machinate a better economic outlook than to weaponize national Central Banks as agents of economic progress? You got it, flood the markets with cheap money in the form of quantitative easing. This, coupled with a series of slanted press releases in the global news networks.
Something big is at work, and it's obviously a concerted effort. Rarely before have we seen the central banks conniving to agree. The writings on the wall. Until when and for how long can they continue to keep on doing this? We can't wait until an overheated economy and a long-standing bull market implode and drive us to another global financial crisis. This time we will have the world’s major central banks to thank for that.
In the meantime, and for the foreseeable future, it's Buy Buy Buy