Geo-Politics Back In The Mix

Add this to the economic uncertainty: following terrorist attacks in Paris and Mali, Turkey (A member of NATO) and Russia are now at odds.

Greater uncertainty means traders / investors tend to move to safer assets from riskier assets, at least temporarily.

Add in the US Thanksgiving holiday and less liquid markets and there is potential for some volatility.

US Q3 GDP was revised higher this morning from 1.5% to 2.1%.

However, behind the scenes, much of this revision can be attributed to a build-up in inventories. Consumer spending was revised lower.

Something we have been watching closely (I mentioned it on BNN a couple of weeks ago and in our last couple of Tuesday webinars)  is the relationship between rising inventories and weakening sales. Historically, a rising ratio of inventory to sales has been correlated to past recessions.

At the moment, the US Fed is on track to raise interest rates at their December 15-16 meeting and markets have priced in a 70% probability. 

At the same time, credit market conditions (lending) are tightening up ( becoming more restrictive) and this has potential ramifications for the record levels of outstanding global debt, including record amounts of "sub-prime" lending for automobile purchases in the US. No wonder automobile purchases have been the main catalyst for consumer spending (along with restaurant spending).

A couple of weeks ago when Michael Hainsworth (BNN: "The Close" http://www.bnn.ca/Video/player.aspx?vid=748970) asked me about a "Santa Clause" rally, I suggested that either Santa had come early or it might be called the "Trick or Treat" rally, but I felt that with all that was going on in the world, it would be unlikely.

Now there is more going on in the world, so look for expensive equity markets to test buying support.

For a more in-depth look into all that is impacting the global economy, financial markets and wealth management, tune in to our weekly webinar. We will post the recorded version on our website at or about 5 pm today:

http://www.highrockcapital.ca/current-edition-of-the-weekly-webinar.html