Week two of the year led to much of the same from week one. The sky is still falling in China and barrels of oil litter everyone’s living rooms…
You get the point. There appears to be an abundance of attention at the start of the year towards a very narrow sub-sect of economic activity.
JOLTs job openings increased to 5.431M, API Weekly Crude Oil Inventories experienced a 3.9M barrel draw down, initial jobless claims came in under 300K again, and Michigan Consumer Sentiment rose to 93.3 from 92.6. All favorable data.
The persistent market deterioration in China has added further stress to commodity prices as well as European, Japanese, and US stock Markets.
Efforts by China to stop the bleeding have all but failed; from circuit breakers to shutting down professional traders on the Shanghai exchange. If it is manipulation of currency or the afore mentioned shutting down of professional traders, China has yet to learn that for markets to be effective they need to be free to move as supply and demand dictates. Short-term losses, while painful, represent long-term viability. Manipulation of markets creates uncertainty around the ability to truly invest in the market successfully (without government intervention).
While the swings in the markets in China will likely subside in the next few weeks, as it did in September, it appears that general volatility will be theme of growth for 2016. It is likely that the CBOE Volatility Index will remain above 20 for most of the year.
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