SVET Markets Weekly Update (October 31, 2022)
The past week macroeconomic indicators updates were mostly on a positive side reinforcing markets participants negative sentiments.
Notably, US GDP grew 2.6 percent (annualized) in Q3 2022 beating analytics prognosis (2.4). That can be mostly attributed to imports going down 6.9 percent, which was accompanied by the exports’ increase (14.4 percents). What has moved the needle was USA producers expanding its deliveries of petroleum products, nonautomotive capital goods and financial services.
Also, durable goods orders saw an increase of 0.4 percent almost doubling experts expectations (0.2 on a monthly basis). It has been propelled by orders for new transportation equipment (the post-enclosure effect), which surged by 1.9 billion (2.1 percent) to USD 95.4 billion.
More importantly, though, personal incomes goes up by 0.4 percent in September (on a monthly basis, propelled by compensations of employees which were rising 0.5 percent) third time in a row (incl. Jul and Aug). Although it comes only slightly above analytics forecasts (0.3 percent) those small but steady increases might serve well FED’s apparatchiks propaganda purposes — to substantiate the next insane banks rate hike on their next meeting scheduled for this week (Nov 1–2).
That has not been helped by simultaneous personal spendings’ increase by 0.6 percent in September (that was the eight out of nine increases in spendings since Jan 2022) while markets trends forecasters put it on 0.4.
Led by political considerations FED is, naturally, expected to ignore all negative signals coming from the ‘real’ economic sectors, including, new home sales falling 10.9 percents to 603K in September (compare to market forecasts of 585K).
[The new home sales regression was as following in 2022: 811K (Jan), 790K (Feb), 707K (Mar), 619K (Apr), 636K (May), 571K (Jun), 543K (Jul) and 677K (Aug).]
Making it even worser, the past two weeks saw the stocks indexes sudden surge propelled by positive corporate earning reports on the one side and, on the other, the temporary ‘stabilization’ on the Ukraine War fronts, which lowered the probability of Russia using tactical nuclear weapons. For the NASDAQ Composite that was the first two consecutive weeks’ increase since the mid-August.
FED hypocrites, firmly set on the pass of the economic destruction, are not likely to leave that fact unnoticed this Wednesday. Powell takes all signs of markets rejuvenations very personally. He and his aging accomplices, implicated in crimes against our financial freedoms, believe that markets participants must bent their knees and act as ordered — not to pursue their self-interests. In several days they are expected to punish us heavily for such insubordination.
Besides Wednesday’s Markets Massacre (watch closely for FED’s announcements starting at 2 pm PST on Nov 2) this week will bring us:
- JOLTs Job Openings (Sept) and ISM Manufacturing PMI (Oct) on Tuesday;
- Balance of Trade (Sept) on Thursday;
- Non Farm Payrolls and Unemployment Rate (both for Oct) on Friday.
That is where each of those indicators stand now:
According to the Bureau of Labor Statistics’ (BLS) the number of job openings (JOLTs) fall to 10.1 million in August. It has confirmed the continuing labor market downward trend (started in March 2022, when JOLTs was on a level of 11.9 million). The largest decreases were in health care (-236K) and the retail trade (-143K).
The ISM Manufacturing PMI decreased to 50.9 in September (compare it with 52.8 in August and market forecasts of 52.2). PMI has been on a straight line downward slope since Nov 2021 when it reached 63.7. With that Institute for Supply Management officials, commenting on the latest PMI data, noted that their ‘panelists companies’, faced by medium- and long-term market uncertainties, are continuously cutting off their labor forces.
Nonetheless, those negative readings, pointing out to the upcoming deep recession, remain one of many other macroeconomic signals deliberately ignored by Powell.
Bureau of Economic Analysis (BEA), which tracks the US trade balance, reported that the deficit narrowed to $67.4 billion in August.
[Side Note: For comparison this number stood at about USD 61 Million in November 1991. It was followed by 1000-x increase in the trade deficit during the next 30 years. Such are the results of the US corporate international expansionists policies. On the one side, it drastically increased world’s economic productivity by corporates using the cheep labor and abandoned natural resources of the 3rd world countries.
On the other, it led to the very high level of national economies interdependencies and, as a result, to their extreme fragility, which now led us into the current state of permanent, costly and bloody calamities. Naturally, we see the solution in the total decentralization of world’s economic and financial systems. In their total disintegration from political mechanisms. Running the economy and finance must become as technical as running the nuclear power plant.]
August US trade deficit stood at the lowest since May 2021 level. It reflected a combined effect of a decrease in the goods (to USD 87.6 billion) and the services surplus (to $20.2 billion). Imports declined 1.1 percent (to USD 326.3 billion). It was led by diminishing international oil supplies, as well as a fall in semiconductors, civilian aircrafts and computers. On the other hand, purchases rose for cars and travel.
Exports degraded at a much slower 0.3 percent pace (to USD 258.9 billion). Main decreases were registered in crude oil, cars and travel, with increases in shipments of natural gas, pharmaceutical preparations and financial services.
The unemployment rate, issued by the Bureau of Labor Statistics (BLS), is among the most politicized and, as a consequences, misleading macroeconomic indicators.
In modern times peoples increasingly work remotely, multitasking and taking on multiple micro-jobs simultaneously without any real prospects of their professional career growth or their social statuses changes.
As a result the unemployment rate might be underestimated by BLC as peoples state to BLS surveyors their formal ‘employed’ status. However, that might change overnight as corporations start to actively implement their job-cutting programs, already announced by many multinationals.
Officially, in September the US unemployment rate fell to 3.5 percent (it stood at 3.7 in August). Analytics’ forecasts for October put it on 3.5 percent, again. The number of unemployed persons declined by 261 thousand to 5.75 million in September. The number of employed increased by 204 thousand to 158.9 million. The labor force participation rate get down to 62.3 percent from 62.4 percent.
Overall, from the financial markets participants’ perspectives, the past week had only increased players confusions. As a result, it led to massive shorts liquidations events on several major trading floors.
On the one side, markets face unprecedented, global social and political uncertainties. The War apparently becomes a long-term one but its nuclear apotheosis seems more remote than a couple of weeks ago.
Additionally, the dramatic political polarization in USA and EU threatens to change its policies for the long-term. However, the opposing groups expect to paradoxically benefit from all outcomes. It results in markets going up and down on a slightest provocation.
On the macroeconomic side all main indicators are showing the US economy going into the prolonged recession. At the same time, markets payers consider it as the artificially orchestrated, therefore, not the unavoidable one. They frantically scrutinize any scrap of Powell’s uttering and FED minutes transcripts hoping to find early signs of long-overdue changes of its economically unsubstantiated policies.
Those evolving macro-controversies directly reflect on the Bitcoin (cryptocurrencies) market. On the one hand, spooked first-time-crypto institutional investors have already withdraw most of their holdings from BTC, which they categorize as a very risky bet, into USD. However, despite their drastic influence on BTC trades volumes and prices there are still only a few of such corporate BTC buyers. With them off the market what remains are always hungry whales complemented by a great multitude of smaller fishes.
It appears that this big aquarium of ours is capable to maintain BTC prices on a surprisingly high levels even after some major tech stocks forfeiting up to 10 percentages of their value in a day. How long that resilience might last depends, probably, on how long small fishes can hold their breath being eventually unemployed and gradually eating-out their savings.
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