In a piece on CNBC, the Economic Cycle Research Institute`s Lakshman Achuthan suggested that the US equity market could still be in the danger zone. “The elephant in the room remains the cyclical slowdown. And, as long as that slowdown is in play….the risk of a correction remains. It has not gone away,” were his comments on Trading Nation on 27, January.
Mr Achuthan, an economic forecaster, has looked at the S&P 500 and his views are framed in charts that show breakdowns in the market over the past decade. He said that in a normal economic slowdown the risk of a correction pops way up. He pointed out that the possible downdraft in the correction could be from 10 to 20 percent.
We at Classiarius have looked at stocks and after the December sell off – we have an audiovisual package coming out this week on it – and we see the possibility of a breakdown as well but our concerns are deeper, much deeper. If in fact the US, China and Japan see an economic slowdown in 2019 and 2020, the downside risk of 20 percent that Mr Achuthan mentions makes a lot of sense to us.
Our concern is a global slowdown that kicks emerging markets over the edge and in turn damages the Chinese economy in a way that we have not seen in the past 4 decades. China and US weakness are our concern right now.