17.03.25 - Economic data: China vs. US

The latest US consumer survey, released last Friday, indicated sentiment at its lowest level since 2022 and below market expectations. According to the survey, the consumer sentiment index posted a mid-March reading of 57.9, a 10.5% decline from February, falling short of the consensus forecast for 63.2. At the same time, the one-year inflation outlook spiked to 4.9% (4.4% expected), marking the highest reading since November 2022.
Meanwhile, today’s retail sales data for February revealed modest growth of just 0.2%, also missing expectations of an 0.6% increase.
In contrast to the disappointing economic data from the US, recent figures from China have notably more positive and encouraging. China’s industrial production grew by 5.9% in February (5.3% expected). Consumption also demonstrated signs of acceleration, with retail sales rising by 4% year-on-year (3.8% estimated) in the first two months of the year.

Markets: US markets saw a bounce after briefly entering a correction territory (decline of 10%). China stock markets continued their upward trend.

My view: In the United States, consumer spending is by far the biggest driver of the economy, with personal consumption expenditures accounting for nearly 70% of the nation’s GDP. Consequently, if the consumer sentiment remains subdued, the likelihood of the US entering a recession increases significantly.

If a recession in the US materializes, further downside in US markets is likely, potentially triggering spillover effects across global markets.

Given the elevated risks, even after the recent market decline, I am cautious about aggressively chasing opportunities. Having taken broad-based profits, including from some long-term investments in recent weeks, I remain highly selective about new purchases. My tactical positioning remains unchanged: staying short on selected US tech stocks and semiconductor sector, while maintaining a long stance on Chinese internet stocks, which continue to represent my preferred region.

Should Chinese markets experience a pullback in the coming days, I may further increase exposure in this area.

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