Chinese Exports Surpassed Expectations
What is it?
As we analyze our investments, it is important to spot opportunities outside of just the United States. China in no uncertain terms has gotten hammered down for months. However, there is some news coming out that may provide some optimism to the Chinese market.
“US Treasury Secretary Janet Yellen reiterated that US President Joe Biden’s administration is looking to make tariffs on Chinese goods more “strategic” but this comment had little to no impact on risk sentiment.”*
When news comes out and the markets don’t react, it can be said that investors are not using that to alter their investments.
“During the Asian session, the data from China revealed that the trade surplus widened to $78.76 billion in 12 months to May from $55.12 billion. This print surpassed the market expectation of $58 billion by a wide margin. Furthermore, China’s exports jumped by 15.3% last month, compared to analysts’ forecast of 3.1%.”*
Why does it matter?
With exports being well above their estimates, people may have been pessimistic and not accounting for data like that to come out. However, we want to make sure to not buy into a small bounce in the stock price. We are now looking to add to some of our equity positions that would have exposure to Chinese markets. The U.S. Stock market is not doing great, and we believe that we could diversify our investment returns using funds that are concentrated in or exposed to international markets.
Calm before the ECB storm
What is it?
Important economic data came out last week that could affect the global economy specifically in Europe.
“Markets stay quiet early Thursday and major currency pairs continue to fluctuate in familiar ranges ahead of the European Central Bank’s (ECB) highly anticipated policy announcements.”*
Markets were mostly calm ahead of that European data along with last Friday’s U.S. CPI (inflation data).
Why does it matter?
“The ECB is widely expected to announce an end to its Asset Purchase Programme (APP) and confirm a rate hike in July.”*
Either one typically has contracting effects for the stock market if not already priced in.
“Previewing the ECB meeting, ‘the central bank’s economic projections will be watched out for, given that a July rate hike is already baked in,’ noted FXStreet Analyst Dhwani Mehta. ‘Amidst looming recession risks, in the face of higher energy costs and supply chain crisis, a downgrade to the euro area growth estimates will not go down well with the EUR market should the ECB “up its inflation forecasts.’”*
If a few of these contractionary actions are met with negative market moves, they could spur a bigger sell off of those affected assets.
Other articles we found interesting this week:
Stocks struggle for direction after Target profit warning
Stocks fall as bond yields push higher
Current 401(k) portfolio
Our last portfolio reallocation: 5/19/2022.
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Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.
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Sources:
*Eren Sengezer. “Calm before the ECB storm”. 6/9/2022. FX Street. https://www.fxstreet.com/news/forex-today-calm-before-the-ecb-storm-202206090555
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