China vs India: India to China rotation won’t last long: ED Yardeni

ED YardeniYardeni Research says that while a 25% rise in a week doesn’t happen very often, the market dismissed a lot of the good news and much of it was probably short covering. There are probably some rotation out of India and in China, but that is not going to last long because China’s problems are structural and many of them have to do with a rapidly aging demographic profile.

Since we are going to focus on the central bank’s decisions, there has been a lot of turmoil around the world that has not yet subsided regarding tensions in the Middle East. Raw oil prices They have fluctuated a lot because of that. How do you see the configuration of global markets?
ED Yardeni: He Middle East conflict is having an impact on the price of oil and the recent increase in the price of oil reflects that the Middle East conflict is spreading and becoming a more direct confrontation between Israel and Iran and that could certainly impact availability and price of oil. And that has everyone nervous, of course. Meanwhile, there was a lot of talk in the US about the Federal Reserve aggressively cutting interest rates, but now people are reconsidering that after the very strong jobs number we had on Friday.

What do you think about this trade back from China? Most money managers are breathing a sigh of relief that China is finally rising. Some are happy that their counter-call is working. is he China return trade the real deal?
ED Yardeni: I don’t believe it. I agree that a 25% increase in a week doesn’t happen very often and the market really discounted a lot of the good news. Much of it was probably short coverage. We are probably seeing some rotation from India to China. But I don’t think this will last long because China’s problems are structural and largely have to do with its rapidly aging demographic profile.

Additionally, they have tried to compensate for consumer weakness by dumping goods on global markets and are receiving some backlash from Europe, the United States, and other areas of the world. The Europeans responded with some tariffs on their electric vehicles from China. Therefore, trade with China will not last long. The fundamental problems in the housing market and underlying demographics are structural and cannot be solved by policy.What could be the tactical trade for the rest of the year? Could they be long-term bonds? Could we be long emerging markets or should we just stick with the cash?
ED Yardeni: The market is moving toward a more plausible outlook for interest rates, which is at least in the United States and is that they probably won’t come down as quickly as people thought and bond yields have actually been going up because of the perception. that the Fed may actually have eased too much on September 18 when it did so by 50 basis points, that it may be overstimulating the economy and that has to be a concern after the strong jobs report. Therefore, bonds will offer better returns here. But I wouldn’t say there’s any reason to pursue them. Meanwhile, the U.S. stock market is expanded.

There has been a lot of focus on the Magnificent Seven, but it is expanding to the S&P 493. There are many other good companies in the S&P 500 that will use available technologies, such as artificial intelligence, to increase productivity. I don’t like small and mid-cap companies in the US that much. If there continues to be a correction in India, which is probably all it is, I don’t think it will be anything more than a correction, it will be a buying opportunity. If interest rates are going to go down that much, in the short term in the United States, and if oil prices are going to go up, naturally, that will weigh on the Indian stock market.