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“Show me a hero, and I’ll write you a tragedy.” – F. Scott Fitzgerald

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

To see yesterday’s CNBC interview, you can just click on the image below.

Futures in the US are looking at modest gains this morning ahead of Case Shiller housing numbers at 9 AM and Consumer Confidence at 10 but the big news overnight came out of China where the PBoC announced several stimulus measures designed to boost the economy and the stock market. You have to check out the commentary section of today’s report for a full in-depth recap (you won’t find a better one). While the positive response by the equity market to the stimulus measures is more than warranted given the stops pulled overnight and could have some follow-through in the short term, we’re not quite convinced that “all” the necessary stops were pulled to make this the seminal event for a turnaround in the long-languishing Chinese equity market and economy

As mentioned, China’s overnight stimulus measures powered the Shanghai Composite to a rally of 4.15% for its best one-day gain since July 6th, 2020.  As impressive as the gain was, it barely got the index above its 200-day moving average and only back to levels it traded at in late August. Since its recent high in May, the Shanghai Composite is still down 10%.  You have to start somewhere, but Chinese stocks still have a way to go.

Looking at a longer-term chart, Chinese stocks have had some big bouts of volatility where they more than doubled in just a couple of years and then gave back all of those gains just as fast. What also stands out is how volatility in the country has subsided. Over the last five years, there have been just two one-day gains of 4%+ while in the five before that there were 14.  Combining those two most recent five-year periods, there have been 16 one-day gains of 4% in the last ten years which is only slightly more than half as many as there were in the ten years before that (31)!