Equities vs Exports – more market divergence in 2013. World trade growth fell to 2.0% in 2012 — down from 5.2% in 2011 — and is expected to remain sluggish in 2013 at around 3.3% as the economic slowdown in Europe continues to suppress global import demand, WTO economists reported. Check out here the top exporters globally – as might have guessed, China leads the pack. So what do recent reports tell us in terms of global exports?
As the WTO suggests, exports are flat indicating that no economic rebound in the sluggish global economy is imminent. On the other hand they are not falling off the cliff – so no panic move to the down side in the markets is imminent either. Clearly though looking at the thumbnail chart there is a big divergence between the global economic export activity and the advance of the equity markets globally. A mean reversion trade is coming – click here for other proof of this. For your own local economy, don’t look for any significant improvements in 2013 – you will be lucky to hold flat.
Markets have pull back a bit from recent highs and are probing now to the downside. As stated, we are not looking for a major crash. Markets will mark time through the summer, in a minor pullback waiting to see the next direction of the economy. Will all the central bank easy monetary policy begin its stimulative magic? Not likely – it will just keep asset prices elevated. The point here is we will have some time to see which way this is going, before we get into panic sell mode, let’s get first some confirmation of poor economic conditions ahead. We are looking for a pull back to 1600 on the SP500, but to get it to go lower we will need more negative economic data, or the markets just move sideways – for now.
Daily Market View: (click here for the video)