... a credit event in commodities (note CDS is widening sharply for resources companies – front page chart) may be necessary to cause policy-makers to panic.
... to his comments about the launch of the Chinese currency war, predicted here 2 days before its start:
Stocks have meaningfully underperformed bonds in the past few months as global growth concerns have caused assets related to Emerging Markets, commodities and the resources sector to lurch lower, and the US dollar is threatening an overshoot (it is just 2% from all-time highs as measured by the effective exchange rate), while the China devaluation has sparked renewed concerns over an FX war.
... to his warning that absent QE there is simply no more upside to stocks or earnings:
EPS growth has turned negative everywhere bar Japan. The first half of 2014 saw double-digit gains in EPS, in all except EM. But second quarter 2015 EPS was -5.3% YoY in the US, -3.1% YoY in Europe, -5.8% YoY in EM and up 15.8% YoY in Japan. Simply put, the end of excess liquidity and the end of excess profits have engendered the end of excess returns in 2015.
... to his admission that excess debt and demographics are crushing global growth:
Excess debt, aging demographics, and tech disruption have all conspired to create a very deflationary recovery in recent years. That is why growth continues to outperform value.
... to his warning that the US may have already entered a recession based on inventory vs sales:
China’s deflation concerns exacerbate the precarious position of US manufacturing. Inventories are running far ahead of sales which in the absence of stronger demand, will necessitate further production cuts, and be a negative for profits. Should a manufacturing recession become visible via the NAPM slicing decisively through 50, this would not be positive for stocks, in our view.
... to a rehash of a chart we have shown countless times in just the past month: namely the epic divergence between debt and equity:
Compounding the summer woes of stocks…weakness in the HY market. While the weakness in HY is very concentrated (see quiz – page 8), risk reduction in credit has not been reflected in the S&P500 index.
... the entire thing reads like a rehash of recent Zero Hedge posts.
In fact, the only original point made by Hartnett is his summary, which is as follows: "Arguably the only reason to be bullish risk assets right now is there are no reasons to be bullish."
We couldn't agree more, however we should add that this is indeed bullish if and only if central banks still retain the credibility and potency. The market's negative reaction to the Fed's clearly dovish minutes yesterday has finally shed doubt on this fundamental principal that pushed the market to all time highs since the March 2009 lows.