Sometimes the stock market suffers from a divergent strabismus. Its left eye observes economic activity in the present moment, and its right eye the value of likely cash flows in the next ten years. Today the right eye is pointing to the ground as the resurgence of global inflation weighs heavily on stocks’ multiples. However, and since the end of last month, the left eye has been staring into the sky: our leading indicator of international trade announces a strong rebound in the next two months.

Which is the guiding eye for the global vision?

Benjamin Franklin believed in free trade. “No nation was ever ruined by trade,” he said, adding, “even seemingly the most disadvantageous.”

Now fast forward to equity markets today; world trade in volume is one of the seven macro rules embedded in the artificial brain of TrackMacro, Gavekal-IS’ software providing real-time investment portfolios.

Last month, TrackMacro issued a “strong” signal on trade. World trade is anticipated to boom.

Does this mean equities should rally?

Entering December, the Gavekal TrackMacro model turned positive on world trade from neutral. Is TrackMacro misreading international trade? If not, how can ‘trade’ be accelerating in an environment of rarefied liquidity?

Oxymorons are powerful combinations of contradictory meanings. In practice, oxymorons tend to develop at the margin and at the boundary conditions of a theory, or of a stable environment. Thus, they can reflect instabilities, contradictory forces, potential regime shifts etc. For this reason, they must be taken seriously. World trade is, today, behaving like an oxymoron…

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