Market Comment – Macro headwinds

Last year was very positive, both in terms of stock market and macroeconomic volatility (the volatility of macroeconomic releases). In recent weeks, however, we have noticed a deterioration in macroeconomic releases, especially in the US. Lower inventories and higher imports took a toll on GDP. More detailed data on capital expenditure also shows weakness in spending on some non-cyclical equipment. Meanwhile, inflation expectations are picking up. Weakness was also evident out of China, with producer prices and retail sales weakening and imports dropping significantly. If China was the world’s demand engine last quarter, then it is possible that we are seeing a slowdown. So far, the data is directional, but not still conclusive. It does come, however, at a time of increased trade friction and squabbles over currency devaluations.

David Baker – CIO