Investors aren’t limited to only investing in the S&P 500 and the Dow Jones Industrial Average. Every week we share the market trends we are following. We are interested in whether the trends in those markets are continuing or if they are experiencing a temporary or complete reversal.
When we identify trends, we are only concerned about the price data and what it says about any given market. We don’t need to know why a trend has formed to invest, but our human nature wants to understand what is driving them. Each week we try to offer some perspective on what we think the most substantial moves are and what critical drivers are behind them. Here we look at what is going in our globally diversified, non-correlated Crystal Bay Ubitrend strategy.
Last week’s continuing trends:
- Chinese Yuan
- Japanese Yen
- Maize
- New Zealand Dollar
- Soybean Meal
Last week’s reversing trends:
- Coffee
- Euro-Yen Cross
- Japanese Government Bonds
- US Government Bonds
- Orange Juice
What we are taking note of:
The COVID pandemic has been tough on economies around the world, triggering recessions and soaring unemployment almost everywhere. According to the World Bank, the share of economies in recession in 2020 will exceed that of the Great Depression. The exceptions are few. One of them is China, where the government took aggressive measures unimaginable elsewhere, including electronic surveillance of the whole population’s health status, mandatory quarantines of 50 million people, and removal of infected individuals from their homes and communities to massive field hospitals. But there is another big exception: Taiwan.
Taiwan’s government responded to the COVID pandemic by flawlessly following the standard epidemic playbook: test everyone, isolate the sick, trace their contacts. It was also proactive in mandating face masks. It didn’t resort to totalitarian measures, yet the results have been stellar: only 500 cases and seven deaths in a country of 24 million people.
Taiwan’s success in containing the epidemic allowed it to avoid the economic costs of protracted lockdowns. Restaurants and bars started reopening in May. The mask mandate was limited to designated areas such as subways, schools, and offices went back to regular schedules.
Taiwan’s economy is now expected to grow by 1.6% this year—the forecast has recently been revised upwards. The unemployment rate dropped to 3.9% in July 2020 from 3.97% in June.
How are we heading into next week?
Taiwan’s stock market index reached an all-time high in September. Unlike in the US, the market has not been supercharged by loose monetary and fiscal policy. The central banks’ benchmark interest rate remains flat at 1.125%. The government budget deficit is expected to come in at 2.1% of GDP. Taiwanese dollar has been strengthening against the US dollar.
CBU maintains a long position in the MSCI Taiwan index contract traded in Singapore.
TAMSCI Index – Last 12 Months
