Sep 9 2012

Equity trading volume in the US continues to contract. Equity trading volume low but why?

Equity trading volume in the US continues to move to lower levels even in the face of a rising stock market.  Why is trading volume so low?  A few differing theories are out there trying to explain this change.  One, you have that retail investors are actually out of the market and moving into other items like ETFs or investments that are perceived to be safer.  That can be one of the reasons why equity trading volume is back to levels last seen in 2008.  Or it can simply be that many US retail investors have opted out of the market and are eyeing other items.  The decline in equity trading volume is reflected in the low volatility numbers and it is an interesting development.  It is likely that a combination of things has led to this low equity trading volume in the face of stock market that is up over 100 percent from the lows reached in 2009.

Exchange volume

Time will tell why this is occurring but something is pushing trading volume low.

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Aug 29 2012

China economic slowdown 2012 – China leading indicators continue to point to slower economic growth.

The Chinese economy continues to face the impact of a global contraction.  China’s economy is heavily reliant on exports and is facing the headwinds of a contraction around the world.  The leading indicators are all pointing to signs that the Chinese government may step in with additional stimulus to boost the slowing economy.  Yet is this useful or even helpful?  China is already experiencing a large amount of bad investments in real estate and public work projects that in many cases are poorly done or even well thought out.  Of course China is cautious on many fronts but the overall leading indicator index does give us a pause.  The US and European economies are still fragile especially with Europe and the many nations that have tipped fully into recessions.
The leading indicators tell the story:

China Index of Leading Indicators

The global slowdown is an ongoing story.

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Aug 13 2012

Fiscal balance of US and Europe – Fiscal balance and GDP.

The markets have entered a stage of collective belief that the European Central Bank and the Federal Reserve have now reached a stage of elevation where they can control markets.  This force is so prevalent and strong that even with very high unemployment and giant fiscal imbalances the US stock markets slowly inch their way to their previous peak.  If we examine the fiscal imbalances of various countries in Europe and also look at the US we realize that spending is getting us into a deeper hole only before the hour of big government expenditures.  The process seems simple on paper as long as GDP is growing at a brisk pace.  For the moment however, we have failed to enter a stage of growth and many parts of the world are slowing down dramatically or contracting.

Fiscal imbalances are at elevated levels:

fiscal balance

So the story continues with the belief that somehow, some big force like the ECB or Fed can prop up the markets.  Everyone seems to be operating on the notion that short term loans are the way to solve the challenges ahead.

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