The Rally Returns

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US GDP reignites not only equities rally but base metals, precious metals, oil all at the same time...Dollar pulling back after 5 days of winning streak and believe that with good GDP data, it will …

US GDP reignites not only equities rally but base metals, precious metals, oil all at the same time...Dollar pulling back after 5 days of winning streak and believe that with good GDP data, it will continue...Rupee less on the back of our strong IIP data but more on unbalanced dynamics in United States will continue to strengthen...commodities to rally further on the back of hope of global economic recovery (steel, coal, alluminium, silver, gold) on the back of now stronger conviction over US GDP to grow by =>3% for 2009, equities after few days of expected rally to move sideways along with occasional upticks (as earning season over and one major macro economic data point out with not not much of day to day trigger left) with positive bias...

Last couples of days were about forced selling, which actually let my confidence shattered that whether I am on the wrong side of the trade but GDP data from US have more than put my confidence back on track. I still continue to believe that all emerging markets (including our own Indian market) Indian markets will continue to move on news coming out of developed market especially US. And what more evidence than the selloff in all the emerging markets (more evident from a drop in MSCI) on the back of pullback in developed market, mainly United States.

US stocks rallied as the GDP grew the fastest (3.5%) in last two years against a drop of 0.74 and 6.43% in two previous quarters. GDP growth was mainly fueled by consumer spending, which actually shows off in GDP numbers. The U.S. economy returned to growth in the third quarter after a yearlong contraction as government incentives spurred consumers to spend more on homes and cars. The turnaround in residential investment, which added to GDP for the first time since 2005, was also a bright spot, although it remains to be seen how much of that improvement was linked to government efforts to prop up the housing market.

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  • 1. 1 The Rally Returns Last couples of days were about forced selling, which actually let my confidence shattered that whether I am on the wrong side of the trade but GDP data from US have more than put my confidence back on track. I still continue to believe that all emerging markets (including our own Indian market) Indian markets will continue to move on news coming out of developed market especially US. And what more evidence than the selloff in all the emerging markets (more evident from a drop in MSCI) on the back of pullback in developed market, mainly United States. 30th October, 2009 US stocks rallied as the GDP grew the fastest (3.5%) in last two years against a drop of 0.74 and 6.43% in two previous quarters. GDP growth was mainly fueled by consumer spending, which actually shows off in GDP numbers. The U.S. economy returned to growth in the third quarter after a yearlong contraction as government incentives spurred consumers to spend more on homes and cars. The turnaround in residential investment, which added to GDP for the first time since 2005, was also a bright spot, although it remains to be seen how much of that improvement was linked to government efforts to prop up the housing market. Vinit Tulsyan http://vinittulsyan.wordpress.com
  • 2. 2 The Rally Returns GDP Break Down (%) Q209 Q309 GDP Growth 0.7 3.5 Real personal consumption expenditures 0.9 3.4 Durable Goods 5.6 22.3 Non Durable Goods 1.9 2.0 Services 0.2 1.2 Real nonresidential fixed investment 9.6 2.5 Commercial Real Estate 17.3 9.0 Equipment and software 4.9 1.1 Real residential fixed investment 23.3 23.4 Real exports of goods and services 4.1 14.7 Real imports of goods and services 14.7 16.4 Decrease in Private businesses inventories (US$ bn) 160.2 130.8 Source: US Dept. of Commerce The best part of this GDP data is not the ones which grew mainly on the back of support from govt., but areas such as Non-Durable Goods, Services, Commercial Real Estate, Equipment & Support and decrease in private businesses inventories. The growth in these areas lets one believe that the consumers spending is visible (though slowly). *** Thanking You, Warm Personal Regards, Vinit Tulsyan http://vinittulsyan.wordpress.com 30th October, 2009 *** Vinit Tulsyan http://vinittulsyan.wordpress.com