Chart of the Week
On Monday, the Chinese stock market had its largest one-day rally in 16 years, up 8.5%. The results were driven by interest rate cuts and fiscal spending, which were an attempt to shore up the country’s ailing economy.
Since 2005, there have been five big rallies in China, three fueled by stimulus. The rallies lasted between eight and twenty-two months, with gains of 33% to 230%.
This coincides with earnings expectations in emerging markets outpacing the US by 6%. When this occurred in the past 25 years, emerging market equities typically outperformed the US on a relative basis.
What We’re Reading
Do It Your Way – Morgan Housel
The Great Rotation (to International Stocks) – Verdad
What Is Direct Indexing and Why Should You Care? – CAIA
Podcast of the Week
Post-FOMC Action Plan…and Other Macro Themes – Macro Markets, Guggenheim
Last Week
The second quarter’s final estimate of GDP came in at 3%. This was robust growth considering the negative economic sentiment. Core consumer prices were in line with expectations at 2.7%, trending closer to the Fed’s goal of 2%. Manufacturing surveys show contraction, as it has for the past six months.
The Week Ahead
On Friday, the monthly payrolls report will show whether the recent weakness continues. If the number of new jobs created falls below 100k, then interest rate cuts could be pulled forward. Services data from S&P and the ISM will also be key data releases.
Thank you for reading.
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