We are turning increasingly sceptical on the risk asset outlook in to the summer as we are approaching peak positivity once we get the pamphlet of positive base effects behind us during Q2. The Chinese credit impulse has now clearly rolled over, which should be bad news for PMIs during Q3 and Q4 this year.
It it said that “equities are a winter sport”, and gauging by seasonal charts this looks true. We are indeed heading into a more difficult terrain (June to September),whichcould have both technical and fundamental truth to it.
A rapid rise in margin debt preceeded the stock market crashes and US recessions of 2001 and 2007. However, the S&P500 held up for six months after the margin debt warning signal in the year 2000 and for 4.5 months in 2007. It could thus be that we should be worried looking into the third quarter, even though equities have held up nicely so far.
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