Commenting on China’s exports surging and today’s markets strategist Louis Navellier wrote in a note to investors:
From An Oversold To An Overbought Market
After a big up day yesterday, markets tend to pull back and consolidate, but there's a lot of follow-through this morning. The market went from grossly oversold on Monday to overbought today. I do expect it will pull back and start to consolidate a bit but volume on the upside is very, very bullish.
Historically, the Chinese market has been relatively isolated from international investors, but much is changing there now, making China virtually impossible for the diversified investor to ignore. Earlier this year, CNBC pointed to signs that Chinese regulators may start easing up on their scrutiny of companies after months of clamping down on tech firms. That Read More
Driving the optimism was a very good three-year treasury auction on Tuesday. It had a bid to cover ratio of 2.69. That was much better than a 2.39 before indicting more buyers for the three-year treasury and tamping down the upward pressure on rates. Other treasury auctions this week will offer more color on whether this is a blip or a trend.
The CPI report came out, and did rise for 0.4%, but more than half of that increase was due to gasoline and higher energy costs. Backing out food and energy, the CPI was only up .1%. And in the past year, it's up 1.3% on the core rate of inflation, nowhere near the Fed's inflation goal which sets the stage for investor optimism.
China's Exports Surge
China announced this week that its exports surged 60.6% to $468.9 billion in the first two months of 2021. The Chinese exports to the U.S. have soared 87.5% to $80.5 million in January and February. This is export surge has caused an acute container shortage, so shipping rates have increased, which is good news for the container shipping companies. Costco mentioned last week that the container shortage is delaying its inventory replacement by two to four days and that this container bottleneck is expected to persist through March.
Interestingly, China is forecasting 6% annual GDP growth for 2021, but the U.S. is now forecasted to grow at an 8.3% annual pace in the first quarter. Since the U.S. is a robust consumer driven market, the U.S. has the potential to possibly keep pace with China’s GDP growth in 2021, especially if the U.S. continues to boost its productivity.