Betting On A Bleak Future

Despite a rally in Chinese stocks, traders are looking for bad news.

Stock traders are trying to shake off the Walmart flu that hit the market yesterday. Dow futures were up 65 points in pre-opening trading but have been up as much as 110 points. Although futures are pointing higher, the early move is not impressive given the global backdrop.

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The Chinese stock market has hit an eight-week high, but the rally is being ignored and no one is talking about any Chinese economic resurgence. This is a stock market that’s looking for bad news. It’s not too late for the stock market to get back its mojo for a Santa Claus rally, but traders must first shake-off the bearish bias in the market.

The bond market is feeding off the stock market’s woes, and traders are betting that global stock markets will remain under pressure, resulting in a slower economic environment. They’re so confident in this outlook, they’ve taken out any cushion for a possible Fed tightening this year and into the next.

Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.

October 15, 2015

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