The ‘New Normal’ Demands Prudent & Cautious Investing

The ‘New Normal’ Demands Prudent & Cautious Investing

$DIA, $SPY, $QQQ, $VXX

The latest data on Euroarea GDP growth came in at +0.3% during Q-4 of Y 2015 compared to the same period of the year before and at +1.6% on a Y-Y basis.

That will not change ECB’s President Mario Draghi’s head on pursuit of adding more accommodation. But the ECB is running out of tools that will work when looking at its balance sheet compared to the PCI data

This comes in spite of the problems associated with Chinese trade data, which give little than no insight about what is happening in the wider global economy now.

Participants should be taking notice of this situation in their investing strategy and try to put their faith in as broad a range of economic numbers as is possible and try not to react to single data releases, especially single data releases of dubious quality whether from China, the US or EU.

In Europe there is movement around the issue of Greece. German Finance Minister Wolfgang Schaeuble declared that he really could not justify further debt relief for Greece

So, pay attention to the fact that Greece is at an Key cross roads in terms both of its growth and its negotiations about debt restructuring notwithstanding the market is not as certain as the German finance minister is about the lack of any need of restructuring in the future, but “markets” don’t vote in the German parliament one savvy observer noted Tuesday.

The trouble caused by Greece can not be excluded over the short to median term which means a flashing caution lights for investors.

Free trade has receded as a political issue in the US after the net economic benefits of the North American Free Trade Agreement (NAFTA) between Canada, Mexico, and the United States and that came into force on 1 January 1994 became very obvious over the years since.

The fact that this issue resonated so strongly with an admittedly specific electorate though does raise questions about the future support for: The Trans-Pacific Partnership (TPP) trade agreement among 12 Pacific Rim countries that was signed only a month ago and the proposed Transatlantic Trade and the Investment Partnership (TTIP) trade agreement between the European Union and the United States.

The IMF’s First Deputy Managing Director David Lipton warns that the global economy is clearly at a delicate point, and that now is the time to decisively support economic activity and put the global economy on a sounder footing. Also noting that among the “most disconcerting” signs of trouble in the world economy are “a sharp retrenchment in global capital and trade flows.”

He stated: “The IMF’s latest reading of the global economy shows once again a weakening baseline.”

Expect another downgrade in IMF’s next World Economic Outlook (WEO) due in April.

Long-term participants should not expect better investing times anytime soon, the ‘New Normal.’

Wednesday, the US major stock market indexes finished at: DJIA +36.26 at 17000.36, NAS Comp +25.55 at 4674.37, S&P 500 +10.00 at 1989.26

Volume: Trade was below the recent averages with about 900-M/shares exchanged on the NYSE.

• NAS Comp -6.7% YTD
• Russell 2000 -5.6% YTD
• S&P 500 -2.7% YTD
• DJIA -2.4% YTD

Stay tuned…

Paul Ebeling

HeffX-LTN

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