January 19, 2023

The Davos Downer

By Peter Bower

The World Financial Forum in Davos this past week was a spreader event for pessimism and negativity. World leaders in government and business came together to exchange views. Even if anyone was reasonably positive about their own prospects, by the time they left they would have been infected by a consensus view that the U.S. and world economy were bound to suffer at least a recession, if not something worse this coming year.

In last week’s blog, the Bull pointed out that the technical setup for this market is very encouraging. That did not get aborted this week. There are fundamentals driving our optimism along with the market technicals. They include inflation peaking and quickly declining, the end of interest rate increases being in sight, and China’s reopening. The China element may be the most important intermediate factor.

Chinese leadership has obviously reviewed many of its policies, and faced with much damage done to its prospects, have made an about-face. The Vice Premier at Davos went out of his way to make nice to business interests and specifically stated that China was open for business. They are clearly trying to increase their growth rate. Growth in China would go a long way to solving a myriad of problems there, and they know it. China’s growth spills over to growth elsewhere, including the U.S. Better days are coming, stay steady my friends.

The Lonely Bull