The GMI Top 5 Charts That Make You Go Hmmm...

In this week’s newsletter, we’re going to focus on a few interesting charts we have on our radar to help you think big picture...

As ever, much fuller and more in-depth analysis can be found in Global Macro Investor (www.globalmacroinvestor.com) and Real Vision Pro Macro https://www.realvision.com/pricing) . Global Macro Investor is our full institutional research service and Real Vision Pro Macro is the sophisticated retail investor service, which is co-authored with leading research firm MI2 Partners.

Let’s dive straight in...

GMI Chart 1 – Emerging Markets

Emerging Market Equities are back to trading two standard deviations oversold versus their long-term trend...

This line had better hold... we think it does...

GMI Chart 2 – EEM

As we referenced last week, EEM has cleared its key year-to-date resistance on the back of triggering a daily Sequential Countdown 13 in October. We’re currently in the process of retesting previous resistance (now support) with an upside Countdown on day 3 of 13. It makes for a very interesting chart and certainly something to have on your radar...

GMI Chart 3 – S&P 500

The S&P 500 is also two standard deviations oversold versus its log trend...

Can we go lower?  Sure. But do equities NEED to drop 50% peak-to-trough as in 2000 and 2008?  No, and it’s not our base case...

GMI Chart 4 – AAII % Bearish

Bearish sentiment is coming off its highest level since March 2009, and only three times in the last thirty-five years did we cross 60% bears, literally EVERYONE is bearish!!!

GMI Chart 5 – Global Manufacturing PMI vs. China Credit Impulse

We also believe that 2023 will be an altogether better year for the global economy and risk assets against an overwhelming consensus for a continuation of 2022 and an entrenched global recession...

The GMI Big Picture

Yes, it’s a recession – that’s what we’ve been calling for.

But, we think the recession might look a bit more like that of 1990, which was a very common or garden recession. Sure, we had the savings and loan crisis, but it wasn’t a systemic drawn-out recession as in 2000 and 2008.

The BIG macro imbalances necessary to trigger a repeat of the GFC just aren’t there in our opinion.

Sure, there’s still risk that the S&P 500 can trade lower into year-end on the back of ongoing Fed QT, but this doesn’t mean that equities need to make new lows.

Inflection points are always the most challenging periods of the business cycle to time but, given where sentiment is and our overall outlook for both growth and inflation next year, we’re now more focused on the turn and less on the slowdown, with a brighter outlook than most for 2023.

Stay tuned and see you all next week with another update.

Enjoy!

Raoul Pal – CEO, Founder - Global Macro Investor

Julien Bittel – Head of Macro Research - Global Macro Investor