China has a difficult economic problem. I don’t think it will cause China to invade Taiwan.
President Joe Biden after meeting with President Xi
As a matter of fact, just the opposite is far more likely. This column has detailed the difficulties of Chinese property developers. Sales continue to slow and debt payments have been missed. World economies were never worse than in the 1930s. Still, Japan invaded China in 1931. Hitler came to power at the dead low of the Depression in 1932 but launched a successful offensive in 1936. When times are bad (think Putin’s foray into Ukraine) nothing diverts attention like a war. The Chinese government is no doubt reading the President’s mindset.
The SPX has almost matched the July high of 4,584. It now stands just below that at 4,554. The big rally from late October has carried momentum indicators like Relative Strength to match its same high from July. This is to say the major averages are quite overbought on the daily charts. But recall the SPX is weighted for what is now termed the Magnificent Seven, the tech favorites which have carried the SPX to match the July high. The Equal Weight SPC where all stocks count the same is much lower than its July high. July saw 6,300 and now we have 6,047. This is more in keeping with our idea that this second wave from October of 2022 is overdone.
This rising tide has lifted many boats and broadened the advance. Real Estate XLRE and Financial XLF have easily cleared their 200 day moving averages. Industrials XLI and Materials XLB have also joined the parade posting solid rallies.
Cuts by the Saudis and Russia of one million barrels per day have been met with a yawn in the crude oil market. The October high of 90 is now trading at $76.02. Gasoline futures peaked in September over $2.50. Now it trades at $2.17. I noticed pollster Daniel Schoen reporting the public is not taken with Bidenomics. If you have dined out for lunch lately you can see why. The ten-dollar lunch is disappearing.
The three-month Treasury Bill has fallen to 5.45% and still represents great value. The ten-year note trades a full point lower at 4.265%. This represents a great value and can be rolled every ninety days.
For now the stock market looks extended. Park your funds in Treasury Bills.