It Can Happen There (China)
https://trendmacro.com/system/files/reports/20230818trendmacroluskin-i5.pdf
Friday, August 18, 2023
China’s M2 contracted a year ago, and now there’s deflation. Is that why US stocks are falling?
US Stocks
US Macro
Asia Macro
US stocks are in an alarming correction from a low equity risk premium not seen since 2004, as mortgage rates make new highs and China’s housing woes compound. But forward earnings upgrades are accelerating and estimates of Q3 GDP are almost 6%. This could be just a pre-Jackson Hole tantrum to keep Powell from taking out an insurance policy against inflation with one more hike. Or this might be the “intense correction” we have been expecting as markets recognize the arrival of outright CPI deflation. The catalyst could be China’s July CPI print at negative 0.20% year on year, following its money supply contraction last year. With US M2 in contraction, if it can happen there it can happen here.