US + China macro/PMIs + India


The Caixin services PMI was up strongly, over May, and, like our note regarding the Caixin manufacturing PMI, looks quite at odds with the FoL data. Still, up is up, and the market liked it, the China recovery story is a key part of the global narrative that keeps equities in play, and is definately a part of the “EM looks attractive given strong but expensive India, and cheap but recovering China”.


The US ISM survey data was a bit mixed, the headline services number of 53.8 is steady/stable/good, a number that indicates solid expansion in activity, and the prices paid component fell to 58.1, reversing the past few months worth of uptick (for that one, look to the third row, third column, and note the decline from extreme peaks, then the uptick, and this more recent fall).

Given the market had feared a “second wave” of inflation, this is all good stuff. Employment (third row, first column) remained in contractionary territory, but improved from last month (which was at 45.9) and new orders lifted to 54.1, from 52.2.

That counts as mixed because we want the US to “return to trend” rather than remain overheated, and if employment and new orders lift meaningfully from here, it’s not super clear that inflation should keep trending lower, or that the Fed would need (be permitted, is probably the better framing) to cut.

Still, you gotta look at the macro data, and make a call, in this case, the call is things are still on the side of goldilocks, or, at the least, on net cooling that’s commensurate with equillibrium, and that’s a world where the Fed funds rate doesn’t need to be at c5%.


The elections in India were interesting. Modi was expected to increase his party’s majority (and markets rallied into it) however polls proved once again wildly misleading, and the end result was a loss of majority and instead a coalition government.

Markets sold off heavily on the back of that news (the Nifty sold off 8% at the low) before recovering somewhat.

I actually see that as a good thing, really. When one party is very dominant, the extreme “tails” of probability distributions grow larger (a bit like saying there’s less checks and balances, or less diversity of view/thought/opinion), both to the good (like charging ahead on some national strategy like infrastructure or manufacturing) and to the bad (getting embroiled in adverse geopolitics).

So, capitalism and democracy for the win. India’s long run demographics look great (lots of young, highly educated people) and we are happy with the (relatively modest) exposures we have on.

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