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:
- Wheat
- Chinese Yuan
- Soybean Meal
- Russell 2000 Index
- Indian Rupee
Last week’s reversing trends:
- Copper
- Cocoa
- Orange Juice
- Euro-Pound Cross
- Japanese Equites
What we are taking note of:
The coronavirus pandemic, even though it originated in China, caused much bigger economic disruption in the rest of the world. China itself, together with most countries in East and Southeast Asia, has handled the pandemic remarkably well. Its economy has returned to normal levels, and daily lives have resumed. During the recent mid-autumn festival, celebrated on October 1st this year, record numbers of domestic tourists traveled around the country, with domestic flight bookings up 10 percent year over year. Residents of Wuhan—yes, that Wuhan—were complaining of throngs of out-of-towners crowding the tourist sites.
Chinese economic growth is forecasted to reach 2% in 2020. It would be the lowest number since 1967 but still ahead of most other countries. The US, for comparison, is expected to contract by 3.8%, Japan by 4.7%, and Germany by 6%. Not surprisingly, the Chinese stock market, as measured by the Shanghai Composite Index, outperformed the S&P 500 year-to-date, while showing smaller drawdown and lower volatility.
How are we heading into next week?
Chinese futures markets are not accessible to foreign investors, even though the Chinese government plans to integrate them with world markets over time. Luckily, Singapore Exchange has listed a contract on the A50 Chinese shares index, which is very liquid and available to foreign investors without restrictions. The contract is part of the Crystal Bay Ubitirend universe, and we are actively trading it in the portfolio.