Rodrigo C. Serrano, CFA +52 1 55 3045 9010 rcs2164@columbia.
edu Mexico City, Mexico
Chinas threats: deflation & slowing growth
September, 2015
1
Web site: 12252214477887.tumblr.com
Agenda / Overview
U.S. 10-year Treasury: (Buy) China key factor in Fed hike plans. (9/21/15)
S&P 500: All is not well. Cautiously neutral (7/26/15)
Gold: Patience; easy money to continue. Neutral but increasingly bullish (8/10/15).
Euro: Resolution favors bulls. Neutral (7/27/15)
U.S.: Are expectations too high in 3Q15?
Eurozone: firewalls working; catalyst approaches.
China/Asia: thinning ice slows reform, raises fear.
U.S. 10-year: Buy on China uncertainty
Weak China impacts global trade and
economy. EMs are colateral damage.
Feds new focus on international
developments places China as a key
factor to Feds rate hike plans.
Risks: Overreaction or stabilization in
Chinas weakness, and building US
inflationary pressures
Buy (on 9/21/2015) from Conditionally
bullish (on 8/16/15).
30
China's balancing act
USDCNY devaluation a drop in the bucket
25
15
10
5
0
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
YoY, %
20
Fixed Asset Investment
Retail Sales
Chart: SCR
Chinas National Bureau of Statistics, Yahoo, Freestockcharts RCS
3
S&P 500: All is not well.
U.S. economic growth helping offset
bearish events abroad (China).
Stronger dollar, global weakness
threaten earnings.
Rate hike expectations tightening
financial conditions worldwide.
Breadth weak, Dow Jones divergence,
Cautiously neutral (7/26/15).
US GDP: recovery weaker than expected
Bloomberg, WSJ, RCS
Falling breadth
Euro: Resolution favors bulls
Bull case: Greek deal provides clarity within region-wide economic
pick up, due to 3 stimuli.
Bear case: Political risk increases in Greece, while first review of
reform progress occurs in October.
Watching: political developments. Neutral (7/27/15).
Eurozone PMIs
60
58
56
54
Index
52
50
48
46
44
42
Manufacturing
Markit, Bloomberg, RCS
Services
Jun-15
Apr-15
Feb-15
Dec-14
Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
40
Gold: Patience; easy money to continue
Bull case: China-induced deflationary forces and weak global
economy lead to continued monetary easing.
Bear case: price action; accelerating recovery in Europe; U.S.
growth, and stabilization in China.
Watching: Does currency war continue? Neutral but increasingly
bullish (8/10/15).
U.S.: Current vs. rate hike levels
Freestockcharts.com, David Rosenberg, RCS
6
U.S.: Are expectations too high in 3Q15?
55
50
45
40
New Orders 6M Avg
1.0
3.0
MoM, %
SAAR, (%)
Apr-15
Nov-14
Jun-14
Aug-13
Mar-13
Oct-12
May-12
Dec-11
Jan-14
ISM 3M Avg
Leading indicator
0.5
2.5
2.0
1.5
0.0
-0.5
1.0
0.5
-1.0
0.0
7-Aug
Atlanta Fed
Consensus
ISM, Atlanta Fed, Conference Board, RCS
Backlogs 6M Avg
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
3.5
GDPNow
Jul-11
Feb-11
Sep-10
Apr-10
Nov-09
Jun-09
Jan-09
35
Aug-08
60
Mar-08
Service sector
65
Index
Economic growth helped by service
sector, labor market, and housing.
Leading indicators dont flag oncoming
slowdown.
But, be mindful of reduced confidence,
and prelim data, denting high
expectations.
3 Mth Avg.
6 per. media mvil (3 Mth Avg.)
Eurozone: firewalls working; catalyst approaches
Economic growth picking up solidifies financial firewalls and
limits political contagion.
Short-term execution risk on 3rd Greek rescue
Periphery 10-year yields
14
15
12
13
10
11
9
%
-1
Italy
European Central Bank, Bloomberg, RCS
Spain
Portugal 10 Yr Yield (RHS)
May-15
Jan-15
Sep-14
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Oct-06
Mar-07
Aug-07
Jan-08
Jun-08
Nov-08
Apr-09
Sep-09
Feb-10
Jul-10
Dec-10
May-11
Oct-11
Mar-12
Aug-12
Jan-13
Jun-13
Nov-13
Apr-14
Sep-14
Feb-15
YoY, (%)
M1 growth
China/Asia: thinning ice slows reform, raises fear
20
10
0
-10
-20
-30
Apr-15
Dec-14
Aug-14
Apr-14
Dec-13
Aug-13
Apr-13
Dec-12
Aug-12
Apr-12
Dec-11
Aug-11
Apr-11
Dec-10
Aug-10
-40
Dec-09
30
Apr-10
Government statistics doubted as
high-frequency data conflict.
Officials extraordinary actions mark
step back in reforms.
Military tensions (South China Sea)
may dampen investment.
YoY, %
China - new loans (LC)
40
12M rolling avg.
China home prices
China - total energy consumption
40
30
YoY, %
20
10
0
-10
Chinese National Bureau of Statistics and National Energy Administration, Bloomberg, Investing.com, RCS
Jul-15
Mar-15
Nov-14
Jul-14
Mar-14
Nov-13
Jul-13
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
Nov-10
Jul-10
Mar-10
Nov-09
Jul-09
-20
Additional info and Disclosure
Details on my investment theses available on my website (SCR):
Home page: http://12252214477887.tumblr.com
My views: http://12252214477887.tumblr.com/myviews
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These are my personal views.
Please refer to your financial advisor for asset allocation decisions.
