The Nasty R Word

Today’s Highlights

  • The Surface Example (Individual economies)
  • Behind the Scenes (Yield curve uninversion)
  • The Tech Case (What Disney+ Tells Us)

Please note: All data, figures & graphs are valid as of November 14th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Following on the heels of Great Britain, Germany produced some slightly reassuring data this morning showing 0.1% growth in their economy thus narrowly avoiding an official recession.

The ‘return to growth’ celebration is without much joy however as the country’s economy is still considered to be quite fragile. What’s more, it still faces a major headwind as President Trump’s trade war increasingly focuses on Europe’s automotive exports.

The GDP data out this morning is possibly the worst thing that could have happened. Had the number come in negative as economists had forecasted by analysts, there would have been a strong case for the Government to come in with a strong hand and provide generous stimulus measures.

It’s apparent that the DAX index is having trouble rallying on the news because they’re quite familiar with the dilemma that this unexpected growth presents. But what’s more interesting is the rally we’ve seen in the last few weeks leading up to this moment that has the index very close to its all-time highest level.

(Click on image to enlarge)

If there’s any question where this excitement is coming from, look no further than the European Central Bank who has just now re-kindled their quantitative easing program. Starting November they’re pumping €20 billion a month into the economy. Let it be known that this was never about growth.

Behind the Scenes

Where did these whispers of a recession come from in the first place though?

Well, most analysts who were predicting doom based their projections on the yield curve. The fact that short term bonds were paying more than long term ones was a clear indication that institutional traders were forecasting trouble ahead.

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