Veteran investor Leon Tuey says he believes, contrary to conventional
wisdom, the economy is not heading into recession and commodities are showing
early signs of bottoming.
Among endless concerns, one of the major worries for investors is that the
world is about to slide into a recession. As always, they find arguments to
support their own biases. They point to China which is leading the world to
the Hades, plunging commodity prices, the strong U.S. dollar, earnings
contraction, negative interest rates, Brexit, etc. Also, they argue that
despite years of monetary easing, the recovery has been lackluster at best.
They conclude, therefore, "the central bank is running out of
ammunition." How ignorant and how naïve!
If the merchants of doom stop flapping their gums and "listen"
to the market, they would be far more upbeat on the economy. This year,
Copper, Lumber, and Oil are showing signs of bottoming. Moreover,
Transportation, Basic material, Consumer, and Industrial issues have
outperformed the S&P. If a recession is looming, why would the
economy-sensitive sectors show positive relative strength? Two months are
already gone and only ten months are left in 2016. When is the recession?
Please look at the following charts and comments closely and the
conclusion is clear. The economy is not heading into a recession. Moreover,
global growth, particularly the U.S., will prove better than most think. When
investors, sitting on a mountain of cash, come to their senses, the market
will explode on the upside. In fact, I believe the market has already
bottomed and the bull market has resumed.
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Leon Tuey is a veteran technical analyst.
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All images/charts courtesy of Leon Tuey