Stocks up on the valley view. Ukraine delay, but is there something deeper going on [Video]

USA Factory PMI decline matters. Hints at something deeper.

US factory activity has been steadily slipping. It is still positive on the PMI, but what people may have missed is that it has now moved back below pre-pandemic levels again. All is not well in the manufacturing sector in the US.

We all know this is due to worker shortages and supply chain disruption. Which is why everyone keeps saying just look across the 'valley'.

However, I think we should consider that the pandemic is not just a two year economic aberration, but a long term historic level reset of how people go about their lives, earn a living and support and keep safe their families.

 

While the obvious reasons persist, there is also the case that more lasting damage could be taking place in the US manufacturing sector. And elsewhere in the world.

The USA long ago moved away from manufacturing toward service industries, and then re-discovered that in the end someone has to make the stuff we use in everyday life. If the balance between real production, goods and services we need for our daily lives, and consumer excess/indulgence moves too far toward the latter, then serious problems may arise. The extreme situation would see a collapse of society as everyone attempted to sell luxury non-essential goods and services only. The true wealth security of a nation will always depend on how efficiently it provides the necessary basics for the entire population.

If a society becomes too focussed on 'excessities', it may suddenly at some point find itself falling short of 'necessities'. Cute but true.

While the market enjoyed a tremendous rally, our Monday expectation being well surpassed in degree and duration through Tuesday, the economic data continued to point downward. This again highlights the on-going stretching of the elastic band between stock markets and Main Street economic activity. Of course, that did not stop the market previously, and we have to consider we may be returning to a 'just keep buying' regardless of what is going on in the world style of market.

My favoured outlook from here for US stocks is a further 1-2 weeks consolidation around current levels before resuming what could prove to be a very significant correction phase.

Right now, the rally is about any risk of Ukraine conflict having been re-scheduled until after the Olympics. Perhaps even until March, and that is simply too long a time frame to consider for most short term traders and for funds that are concerned they could miss an important low. Hence buying and consolidation are likely to dominate for the moment.

Suggest keep a watchful eye for any signs of this current buying becoming spent?

Mexico Manufacturing remains in contraction.

Yesterday's Video re RBA.