One Trader Reminds You That America Is ‘Not An Island’

2 thoughts on “One Trader Reminds You That America Is ‘Not An Island’”

1. I will provide an example using DAX companies. If you split by geographic area their revenues / profits we realize one fact: European sales are needed to close the bottom line at break even, US sales to have a positive profit but nothing exciting, Asian sales make the difference between a stock judged as “growth” or not. Margin sales from Asia are the ones boosting profits. This as regards the fundamental factor. Now draw three lines on the same chart, those of Dax, S&P500, and Shangai. You will see how Dax was well correlated to SP500 as usual till spring, then during the summer it starts declining, not as fast and deep like Shangai, but visually it’s clear that it followed Shangai too. I would say Dax became a mix of 60% SP500 + 40% Shangai. Because China makes the difference in the guidance and bottom lines. I don’t have enough data and time to make the same work for the SP500 but intuitively I’m rather sure that the story that American companies rely mainly on the internal market and are an isle is another narrative that will be proved wrong. So far in a month two narratives dropped like a castle of cards: 1) the inflation due to strong growth myth 2) the Russell 2000 “maga” narrative. The guys who analyzed the Ebitda and showed that in reality the Russell 2000 was even more exposed than the main index to international factors (dollar, tariffs) were right.

2. Great inside information Francesca, nothing surprising in the end, but very nice to see some of my gut feelings confirmed.