Synchronisation No More (pt2)
US stocks traded lower on Thursday, with the S&P 500 slipping 0.7% after reaching a new all-time high the day before, the Nasdaq losing 0.8%, and the Dow Jones plunging 550 points.
Walmart shares tumbled nearly 6% after issuing weaker-than-expected fiscal 2026 guidance, despite exceeding Q4 earnings estimates.
Almost all sectors traded in the red, with financials and consumer discretionary emerging as the worst performers.
Meanwhile, investor sentiment remained pressured by geopolitical and economic concerns, particularly fears over trade tariffs and US policy uncertainty.
On the economic data front, weekly jobless claims rose to 219K, surpassing forecasts of 215K, while continuing claims increased to 1.869 million, though still indicative of a resilient labour market.
Policymaking has been intentionally globally synchronised in the post-pandemic era (even much of the post-Global Financial Crisis era). That includes;
monetary,
fiscal,
climate,
social,
public health policy.
But that global synchronisation has broken, with the "populist" political shakeup in the U.S. The new, more nationalist policy path taken by the U.S. has almost immediately been reflected in this chart of business sentiment (U.S. relative to Germany) … Last month's note.
This divergence is about pro-sovereignty, pro-growth and deregulation vs. diluted sovereignty, slow-to-no growth and excessive regulation.
It's about optimism versus pessimism.
And with that, we talked about the prospects of a populist political shakeup spreading, globally (with Trump-like candidates/policies). It's brewing in Europe.
A big snap election is this Sunday in Germany; the populist (AfD) candidate is polling around 14 points behind the favoured CDU candidate but has been effective in galvanising pushback against the government overreach and policy failures of the incumbent regime.
Let's take a look at German stocks as we head into this weekend's election.
Despite the gloomy German business sentiment we observed in the first chart, and despite posting a second consecutive year of contracting economic growth, German stocks have been on a tear, making new record highs, almost by the day, since late December.
But the DAX put in a bearish technical reversal signal (an outside day).