Unleash The Bull 🐂

Did you know that even in uncertain times, the stock market's resilience is a testament to the strong spirit of investors?

This is even more true when considering how market “experts” keep predicting the end of the world.

In this edition, we cut through the nonsense to bring you insights on three pivotal areas:

• Is the Stock Market’s Foundation Really Starting to Crack: Contrary to fears, the market shows strength with small cap stocks leading the charge, signaling a broad-based rally that defies the usual market tremors 😵

• Geopolitics and Oil: How much Risk: Despite potential upheaval from Middle Eastern conflicts, oil prices have remained unexpectedly stable, thanks to a balance in global supply and demand dynamics 🛢️

• Has China Bottomed: Comparing China's current economic downturn with historic U.S. recoveries, we explore the likelihood of a rebound amidst its unique political and economic challenges 🐉

Dive into these analyses for a clear-eyed view of today's economic landscape, where informed insights pave the way for strategic investment decisions.

Is the Stock Market’s Foundation Really Starting to Crack? 😵

The most widely read finance magazine, Barrons, answers this question by arguing that the new highs in the stock market are being led by tech, and mostly by the magnificent 7 stocks.

Their analysis is off base.

Since early December, small cap stocks have outperformed tech 📈

If anything, the stock market rally is becoming more broad-based, not less.

After such a massive rally that has been underway since October 27, 2023, there are bound to be pull-backs, but it is crystal clear we are in a bull market 🐂

There will always be plenty to worry about and there will always be volatility, even in bull markets.

Geopolitics and Oil: How much Risk? 🛢️

Since the outset of the war in the Middle East, which started with Hamas’s savage Jihadist attack on Israel on October 7, 2023, oil analysts have warned that oil could surge well above $100 per barrel and disrupt the global economy.

Yet oil prices are below $80 per barrel, lower than they were before the war began.

What’s the reason for this surprise?

The answer lies in both supply and demand ⚖️

On the supply side, many of the world’s oil producers have been ramping up supply in recent months, most important in the United States.

On the demand side, the largest importer of oil, China, is stuck in economic malaise.

Neither of these factors are set to change any time soon, so the risk of a damaging breakout in oil prices seems well contained ⛰️

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Has China Bottomed?🐉

Emerging Markets investors have been calling for China to bottom for years.

Now they are drawing hopeful comparisons between China and the depression era United States.

China’s benchmark CSI stock index has declined for three successive years as of 2023, and Hong Kong’s Hang Seng Index dropped for a fourth consecutive year, a stretch comparable to the Dow Jones Industrials plunge between 1929-1932.

The Dow went on to soar 66% in 1933 after the Federal Reserve injected liquidity through government bond purchases (what we now call quantitative easing) and the New Deal began.

But those looking for a sharp recovery in the Chinese stocks driven by similar policies are likely to be disappointed 😱

There is a wide gulf between the policies of a paranoid totalitarian Chinese regime and those of democratic United States of the early 1930s.

President Xi’s policies have been misguided since he assumed power in 2012.

There is no hint that his policies are about to make a turn toward rationality ❌

Inner Circle Macro Update

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