Global Equities registered positive upwards trend for the month of March despite a short hiccup as the US treasury yield curve inverted again. The US treasury yield curve is a closely watched barometer for a possible recession in the near future and an inverted yield curve will lead to automated sell-off as fund houses move to more caution. However, a spat of positive developments around the world reversed the sell-off. Here are some of the good news that made brought about an optimistic stock market.
Breakthrough in US-China Trade Negotiation
High level US and China trade officials hail a breakthrough in their negotiations as China admitted to the problem of IP theft and forced technological transfer, which China has refused to acknowledge in previous talks. Meanwhile, China law makers are looking to pass laws banning forced technology transfer and also have set up an intellectual property court to look into the problem of IP theft. This turn of events gave hope to the market that the Chinese government is serious in implementing the changes demanded by US in the trade deal.
Strong Manufacturing Data from US and China
US manufacturing levels registered a rebound from a 2 years low and it also added 196,000 jobs in March, blowing away the expectations made by analysts. This gave the US stock market a strong boost in confidence as 2 of the "recession indicators" pointed to a positive trend to the economy, as opposed to the inverted yield curve. Over at China, the latest manufacturing data indicated that the economic stimulants put in by the Chinese government is taking hold, leading to a strong rebound in the China stock indices.
Oil Continues to Recover
Oil prices resume their march past the US$70 mark as a decline in OPEC production and conflicts in Libya and Venezuela increased the concerns of a tighter supply, pushing the price up.
Portfolio Strategy
The market continues to attempt to recover to the previous peak in October 2018 and base on the current economic and technical data, there is a good chance that the previous peak will be reach. The US stock valuation has reached its expensive state again due to its quick recovery with almost no significant improvements in the profitability of US corporations. Meanwhile, Emerging Markets is considered to be still relatively cheap as the valuation is still reasonable and the index is still way off from its previous peak at the start of 2018.
We are looking to take some profits off the table if the US market fails to breech its previous high as this will indicate a failure in both fundamental and technical indicator and caution is needed especially at this stage of the economic cycle where the economy cycle is tipped to move on to the next phase.
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