The latest US consumer survey, released last Friday, indicated sentiment at its lowest level since 2022 and below market expectations. According to the survey, the consumer sentiment index posted a mid-March reading of 57.9, a 10.5% decline from February, falling short of the consensus forecast for 63.2. At the same time, the one-year inflation outlook spiked to 4.9% (4.4% expected), marking the highest reading since November 2022.
Meanwhile, today’s retail sales data for February revealed modest growth of just 0.2%, also missing expectations of an 0.6% increase.
In contrast to the disappointing economic data from the US, recent figures from China have notably more positive and encouraging. China’s industrial production grew by 5.9% in February (5.3% expected). Consumption also demonstrated signs of acceleration, with retail sales rising by 4% year-on-year (3.8% estimated) in the first two months of the year.
Markets: US markets saw a bounce after briefly entering a correction territory (decline of 10%). China stock markets continued their upward trend.
My view: In the United States, consumer spending is by far the biggest driver of the economy, with personal consumption expenditures accounting for nearly 70% of the nation’s GDP. Consequently, if the consumer sentiment remains subdued, the likelihood of the US entering a recession increases significantly.
If a recession in the US materializes, further downside in US markets is likely, potentially triggering spillover effects across global markets.
Given the elevated risks, even after the recent market decline, I am cautious about aggressively chasing opportunities. Having taken broad-based profits, including from some long-term investments in recent weeks, I remain highly selective about new purchases. My tactical positioning remains unchanged: staying short on selected US tech stocks and semiconductor sector, while maintaining a long stance on Chinese internet stocks, which continue to represent my preferred region.
Should Chinese markets experience a pullback in the coming days, I may further increase exposure in this area.
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