The worst sort of pattern we could have may be shaping up on the S&P 500 $SPY: a dreaded sideways rectangle as the economy moves into stagflation. It’s way too early to say for sure if that’s what we’re going into but we can plot a sideways trend channel on the daily chart (gray dashed lines), in the 3-month time frame.
If capital gains appreciation is going to be negatively impacted in 2023 because of stagflation, this sideways chart pattern is the pattern that we would expect to see. This would also explain why fixed income and dividend-paying stocks are seeing large inflows over the last couple of months.
The consensus is that institutional investors are very concerned about the growing unrest in China.
Asian markets continue to be focused on the social unrest spreading across China and Beijing’s response to it. Protests against the strict zero-COVID policy and the limitations on freedom are becoming more widespread. Chinese stocks experienced their biggest decline in a month on Monday, November 28, 2022, and the offshore yuan fell for a fifth day in a row.
Does the unrest accelerate a re-opening of the Chinese economy, or does it prompt President Xi Jingping to double down with a brutal and violent crackdown?