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US Investors Should Stay Patient and Wait Until Volatility Eases

US Investors Should Stay Patient and Wait Until Volatility Eases
(Dollar Photo Club)

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Friday, 04 January 2019 10:30 AM Current | Bio | Archive

President Donald Trump has invited congressional leaders for talks to end shutdown, which is the most investors hope for, as The Guardian reported.

Meanwhile, U.S. employers hired the most workers in 10 months in December while boosting wages, which could help ease the fears about the economy’s health that have roiled financial markets.

U.S. investors shouldn't get too pessimistic because of all the current negative media comments.

There is a global economic slowing, but the U.S. economy isn't falling off a cliff.

Meanwhile, the People’s Bank of China (PBOC) cut its Banks’ Reserve Ratio. China’s central bank released cash into the Chinese economy to support growth by cutting the amount of cash that lenders must hold as reserves by 1 percent (0.5 percent on January 15 and 0.5 percent on January 25).

Of course, no one will admits it’s because of negative effects of the trade war. In simple words, that means the Chinese Central Bank will continue to put its foot on the accelerator.

As an investor, for now at least, I would again prefer to remain neutral. I plan to wait and not get to overoptimistic. 

Meanwhile, Apple warned of disappointing quarterly revenues because of poor sales in China, and Cargill announced worse-than-expected results out of China. Investors could do well taking note of this because we certainly can’t call this positive news.

Nevertheless, the Caixin China Composite PMI data were released that cover both manufacturing and services and that showed a further rise in overall Chinese business activity during December. Furthermore, the rate of expansion picked up from November, with the Composite Output Index rising from 51.9 to a five-month high of 52.2.

The level of positive sentiment towards the 12-month business outlook improved slightly at manufacturers and service providers at the end of the year. The gauges for input costs and output charges continued to drop, pointing to easing inflationary pressures.

No, so far at least, China is not headed for a “hard” landing.

Elsewhere, the IHS Markit Eurozone Composite PMI posted its slowest growth in over 4 years during December. The biggest question of all for investors is: Will the European Central Bank now run down its quantitative easing undertaking?

The final Eurozone Composite Output Index was down to 51.1 from 52.7 in November and the final Eurozone Services Business Activity Index was down to 51.2 from 53.4 in November.

With expectations of output dropping to the lowest in more than 4 years, companies are not anticipating any imminent revival in demand. Worries reflect multiple headwinds from trade wars, Brexit, heightened political uncertainty, financial market volatility and slower global economic growth.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.
 

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HansParisis
As an investor, for now at least, I would again prefer to remain neutral. I plan to wait and not get to overoptimistic. 
global, economy, us, fed, trump
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2019-30-04
Friday, 04 January 2019 10:30 AM
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