A Sustained Rebound
Signs that the global economy will avoid a recession in 2016 are important to sustaining any stock market rebound and limiting future drops to temporary corrections rather than a prolonged bear market. In the coming weeks, these signs may be found in:
Earnings reports – Market participants will be listening to the balance of companies’ comments on their sales to China and the impact of lower oil prices on their business. Last quarter, a number of industrial companies noted weak sales to China while consumer companies saw strong sales growth.
Economic data – Markets will be watching the manufacturing purchasing managers indexes for many countries released on February 1. Manufacturing, often seen as a leading economic indicator, has been a soft spot in the global economy over the past year and a half.
Business lending – Central bank reports on bank lending to businesses will be on investors’ radar screens to see if the sell-off in the corporate bond market is more broadly impacting companies’ ability to borrow.
Released last week, the ECB business lending survey for the fourth quarter revealed that Europe’s banks have continued to ease lending standards, as you can see in the chart below.
Eurozone Bbanks Continue To Make It Easier For Businesses To Borrow
Rather than rescuing investors, comments from central bankers are more likely to create volatility, both up and down, in the markets until the global economic path is clearer.
Jeffrey Kleintop is senior vice president and chief global investment strategist at Charles Schwab & Co.
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