The market has been witnessing a period of comparative calm, regardless of daily tension on the tape so evident for those of us who trade the S&P for instance. To others, it appears to be a narrow indecision pattern. Part of this surrounded expected jitters ahead of the now-ended G20, at which we learn did indeed result in Finance Ministers emphasizing a huge need for fiscal growth efforts (totally agree) as contrasted to expecting more just from stimulus efforts or monetary policy alone.

The part they didn’t say as G20 wrapped-up on Saturday (this reported delayed so as to know the final statements) is essentially what that refers too: a limited if not entirely exhausted, armamentarium of central banks to keep growing debt by financially-engineered money printing. Or that doing so not only exhausted any benefits therefrom, but became counterproductive (as we’ve contended).

During this erratic preceding ‘calm’, so many skipped the facts (other than Oil’s move that they couldn’t ignore, and we’re pleased to see it firmer, especially in the face of renewed Dollar strength as both the Euro and Pound soften more). Optimists here are rationalizing (even about Oil) as a further proof of recovery, or however it was interpreted; triggering newly-generated calls for higher highs by S&P; often forgetting similar pundit calls to sell the rally just days ago. I think those that missed out needed to use recent upside phases for that purpose, which is why I termed the week just past as an ‘exhaustion’ phase. 

Contradicting the official statements of not pushing for monetary policy moves; it is useful to consider what China’s finance minister, Lou Jiwei said Saturday:

“we agreed to use all tools -monetary, fiscal and structural- to boost growth.” I note that because while reporters may not realize it, that means China already is breaking ranks with the G20 by simply referring to use of monetary policies. I think this is either a slip, or it intentionally means they didn’t really concur with a reset approach to encouraging growth. They’d like too; but maybe they can’t.  

Quick ‘first-blush’ take of this: central banks proved critical in avoiding a global slide into depression after the ‘Epic Debacle’ we called for in 2007-’08; then for sure kept stimulus programs going far too long; actually instigating some of the competitive devaluations that they now ‘say’ are finished; but problems are not.

From this Meeting, we can stay that there’s now really little consensus amongthe primary global economic guardians backing stepped-up monetary stimulus. So while the world awaits (don’t hold your ‘breadth’) fiscal moves to aid growth, what you have are ‘wishful thinking’ expectations of central bank assistance to again stem-the-slide, essentially withdrawn (at least from the summary release at G20). Thus one would suspect, media rationalizations aside, that markets at this point should indeed favor the downside, through a process that can (but for sure doesn’t have to belabor this) move to lower S&P price levels along the line we’ve outlined, which doesn’t have to mean an immediate implosion; but moves in the direction of a process that takes us to lower levels one-way or another. 

Print Friendly, PDF & Email