New Year, New Crisis

So a stock market fall in the first week of the new year, is a very common occurrence.

In December, Fund Managers and Hedge funds load up on stock with their spare cash, this drives up equity market and helkps them to hit their targets for their bonus's for the year; hence the term, Santa Rally.

At the end of 2015, this was more muted, as world events meant that shocks aplenty abound and even manager desperate for bonus' don't want to be loaded with stocks that fall in value.

The flip side fo Santa rally is that Fund managers sell in the first week of January ever year, book some losses and then take on cash which they can play with for a whole year - the losses they have some time to make up and their all important bonus' are paid in Feb on last years results.

However, could it be different this year? The markets are very wobbly in China, where a real terms recession is underway in many industries while the property market bubbles away agin, and also macro problems in the Middle East (as per the whole of recorded human history, 'tis true) are not going away. Hence a rather sharp 2.5% sell off on the FTSE this morning.

That is much more of a crash than usual and sets the index up for a tough year already, off the back of what was a losing year last year. With US interest rates rising and weakness continuing in commodity markets, there will be a lot of downside risk on the FTSE in the first quarter at least.

It is not a very happy share buying environment unless you want to try high risk pharma companies that seem to have replaced E&P oil companies as the high risk, high reward AIM bets.

It will be an interesting year.

September - warning signs

As noted last week, and indeed every year, the old adage in the City is to "sell in May and come back on St Ledger's day."

Well that is 9th September this year so we still have a week or so to go. However, today is the end of the summer holidays - the August Bank Holiday is over, school kids are going back in a few days, the commuter trains are full and the City offices filling up again. Even serial holidayer Prime Minister Cameron is back to work.

And what do they come back to, a China manufacturing PMI reading of 49.7, this is now serious stuff. It is one thing to overdo the whole China is dead meme - easy to say, less easy to prove. However, the meme is that China is slowing - whereas the data is now starting to show that China is likely to be in outright recession soon, if it is not already (after all, much of the data is rigged, so we have to look at foreign sources).

Notable is the continuing decline in power output. How much power China is using is often cited as the key metric to watch. After all, all the new factories and cities being built should significantly up power drawn down, but in recent months this has been falling - 2% in August for example. Overall for the past year it is now just 0.4% up after months of recent falls.

A true recession in China will spook Western markets further for sure and this is increasingly looking like it will be the case for Q4 2015 and Q1 2016. September and October are looking set to be bumpy months unless somehow the falls so far are deemed to be deep enough....