NEW YORK ( TheStreet) -- Poor economic data continues to flow from the macro environment's most important countries. Early Wednesday, German business sentiment missed the target of even the most pessimistic analysts. Investors saw this as a final straw in pushing the ECB towards more accommodative policy.
The U.S. durable goods reading gave no form of respite. The release highlighted the drag that higher payroll taxes have had on the U.S. economy. In spite of the negative tone, equities were able to see a silver lining in Goldman Sachs' advice on being "overweight" equities, which kept markets at break even. The deterioration of global growth and tepid inflation is seen within the inter-market charts below.
The first chart, above, is of
DB Commodity Index Tracking Fund
Barclays 20 Year Treasury Bond Fund
(TLT) . Commodities have felt selling pressure due to declining global demand. As industrial production falls, countries find themselves needing less oil, copper, etc. In a risk-on environment this pair should see strength. The fact that the trend broke down in mid-March falls in line with other inter-market indicators. The global economy lost some luster towards the end of the first quarter, further represented in the charts below.
The next chart is of Barclays TIPS Bond Fund (TIP) over Barclays 20 Year Treasury Bond Fund. This ratio directly measures inflation expectation, similar to that of the commodities indicator at the beginning of the article. People are viewing near term inflation as less of a threat with weakening China, euro region and U.S. economies. Growth is necessary for risk assets to see a valid move higher, central bank easing can only do so much. It can create a floor that keeps risk assets afloat, but it looks as if the TIPS market has become weary of this game.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV