TrendCompass "Key Markets" report launches on Substack
Economic sentiment Brightens in the US, darkens in Europe
Good morning,
After two years on Substack, I decided to publish one of our market reports on this platform. Because Substack takes care of maintaining subscriptions, mailing lists and distribution, my hope is that it will allow us to offer these reports at a much lower cost. Currently, our reports range between $200 and $800 per month. Here we’re aiming at below $50 and for the rest of this month they’ll be $0.00.
Economic sentiment Brightens in the US, darkens in Europe
In stark contrast to the mood in the US, economic sentiment in Europe, as tracked by the Mannheim-based ZEW (Leibnitz-Zentrum für Europäische Wirtschaftsforschung) recorded a very significant deterioration in economic sentiment. The ZEW Indicator of Economic Sentiment is based on the ZEW Financial Market Test, interviews with up to 300 experts from banks, insurance companies and financial departments of selected corporations.
The select group of experts are asked about their assessments and forecasts for important international financial market data every month since 1991. Participants are asked about their six-months expectations concerning the economy, inflation rates, interest rates, stock markets and currency rates. ZEW's most recent survey, for the current month concluded as follows:
“Economic expectations for Germany have been overshadowed by Trump’s victory and the collapse of the German government coalition. In the current survey, economic sentiment has declined – and the outcome of the US presidential election is likely to be the main reason for this. The fact that economic expectations for the USA are clearly rising, while economic sentiment for China and the eurozone is falling, supports this view."
In terms of concrete figures, we had the following results:
ZEW's Current Situation Index dropped from -86.9 in October to -91.4 in November. The consensus expectation was a much less pessimistic -86.
For the Eurozone, the ZEW Economic Sentiment Index dropped from 20.1 for October to 12.5 today. The expected figure was 205.
German ZEW Economic Sentiment Index also dropped precipitously, from 13.1 reported in October to 7.4 vs. the expected level was 12.8.
You can find the full report at this link. In all, the sentiment dimmed quite sharply and significantly more than expected at the same time when US sentiment suddenly brightened. Over the last few days, the capital markets confirmed these views with sharp declines of the euro, British pound and yen against the US dollar. It remains to be seen whether these trends will continue, or will we see further unexpected surprises over the coming weeks.
ZEW President Achim Wambach tried to put a touch of positive spin on this last report by asserting that the economic prospects for Germany could "improve with snap elections on the horizon. Overall, what we're currently observing is a very dynamic development of economic expectations." How exactly the snap elections could improve Germany's economic prospects may only be clear to Professor Wambach, but it's all about them dynamic developments in economic expectations and the word salads we can toss from big words and empty platitudes. The German ruling establishment is now maneuvering to delay the elections under various excuses. The real reason to delay, I believe, is to give themselves time to ban the AfD party. If they manage to do this, the elections will only further dim the sentiment and add to social tensions in 2025.
Trading signals for Key Markets, 14 Nov. 2024
With yesterday’s closing prices we have no new signals to report. Your exposure should remain unchanged, as follows:
Full Key Markets portfolio report is available at the following link:
TrendCompass Key Markets portfolio report for 14 Nov. 2024.
To learn more about TrendCompass reports please check our main TrendCompass web page. We’d encourage you to also have a read through our TrendCompass User Manual page.
Best regards,
Alex Krainer