US markets see Happy Days again

Consumer demand


US house, jobs Jan14New Year optimism over the economic outlook is breaking out all over the USA.   Weak employment numbers for December were ignored, as were weak data on housing markets.  Whilst prices for benzene, the blog’s favourite sentiment indicator, not only jumped to a record high but dragged European levels to an all-time record as well.

Happy Days are clearly here again.

The problem is that the data doesn’t support the optimism.  And not just the short-term data, but the more important long-term data, as the charts above show:

  • The percentage of people employed, the participation rate, is back at 1978 levels of 62.8% (left chart)
  • Annual 2013 housing starts at 923k were still below the lowest figure ever seen before 2007 (right chart)

The detail of the numbers is also very worrying:

  • The number of Americans employed in December at 136m was still 3m below the November 2007 peak.  There has never before been a period when employment has failed to recover to previous levels.
  • Even more importantly, the improvement in housing markets since 2009 seems now to have come to a halt.  Higher interest rates have taken levels of refinancing back to those last seen in 2000, whilst Americans with average credit scores still find mortgages difficult to obtain

Markets are at their most dangerous when they take leave of the real world and run solely on sentiment.  The US market moved into melt-up mode in May, and this was confirmed in November with the record $142m price for a Bacon painting.  It thus seems only appropriate that we now learn this was bought by the former wife of casino billionaire Stephen Wynn.

Those who run casinos are clearly at home with today’s market movements.  And with net worth of $1.9bn, the former Ms Wynn probably won’t worry too much about what happens to her painting’s value in the future.  But for the rest of us, in the real world, it seems a bit late to be jumping on last year’s trend

Or, as the Financial Times headlined a major analysis. “Valuations: Is This Nuts?”

The blog thus believes the ‘Two Steps and a Stumble’ scenario is worth watching very carefully.  Given today’s optimism, retiring Fed Chairman Ben Bernanke may well decide to taper his stimulus by another $10bn at his final meeting later this month.  If he doesn’t, markets would presumably become worried about what worried him.

So that would be the Two Steps.  Then next month, the pressure would be on new Chair Janet Yellen to taper by another $10bn.  In the past, when interest rates were rising, markets used to shrug off the impact of the first two increases.  But by the third, reality began to dawn that things were not looking so good after all – hence the ‘Two Steps and a Stumble’ motto.

As American humourist Mark Twain once wisely noted, “history doesn’t repeat itself but it does rhyme”.

Benchmark price movements since January 2013 with ICIS pricing comments are below:
PTA China, down 19%. “Weaker performance in the downstream polyester sectors continued to add downward pressure”
Brent crude oil, down 5%
Naphtha Europe, down 3%. Prices fell below $900/t, pulled down by a steep fall in Asian prices and weak domestic petrochemical demand combined with poor gasoline uptake ”
Benzene, Europe, up 3%. Soaring US spot numbers and healthy January demand has pushed European numbers comfortably above the $1,550/tonne mark to record highs”
HDPE US exportup 14%. Demand remains weak in Asia, and with the Mexican peso weakening against the US dollar, local resin is becoming more competitively priced”
US$: yen, up 19%
S&P 500 stock market index, up 25%


EU auto sales slide for 4th year in a row


Final data for EU auto sales has now been published, and is summarised in the ch...

Learn more

You can't print babies to create new demand


What would you have done 5 years ago, in 2009, if you had been given $16tn to ...

Learn more
More posts
Smartphone sales highlight new trends in consumer markets

Smartphone markets continue to provide early warning of the major changes taking place in consumer m...

Buyers scramble for product as global supply chains breakdown

Asian LNG prices reached $32.50/MMBTU this month, up from less than $2/MMBTU in June. The Shanghai C...

5 key questions for success in the New Normal

Sustainability rather than globalisation is becoming the key driver for business. And the paradigm s...

US chemical companies face ‘wake-up call’ as Biden focuses on the Climate Change agenda

I worked for many years at a world-leading chemical company, ICI. But sadly, it lost its way as seni...

Plastics producers face a ‘wake-up call’ from both ends of the value chain

Plastics producers have had a great run over the past 60 years, as demand took off for their product...

Smartphone sales confirm mid-market of ‘affordable luxury’ is disappearing

Another 3 months, another decline in global smartphone sales. And more pressure on mid-market player...

Welcome to the New Normal – a look ahead to 2030

10 years ago, I took a look ahead at what we could expect in the next decade, as discussed last week...

If you don’t want to know the future, look away now

Next week, I will publish my annual Budget Outlook, covering the 2021-2023 period. It will highlight...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more