China is expected to report GDP growth of 11.9% tonight. For reference, GDP growth rates for the last four quarters have been 6.2%, 7.9%, 9.1% and 10.7%. While most market strategists are focused on the GDP, the key question for our ZYX Multi-Asset Global Allocation Model is the inflation rate.
In our last allocation model update, we projected rising inflation and rising interest rates in China. Such a scenario will benefit most of the Asia, but will work against China. Our allocation reflects this scenario in being short Chinese equities, long Taiwanese equities, long Chinese Yuan and short copper . ( It appears that stockpiles of copper in China are rising faster than the consumption rate; rising interest rates and slowing growth will make stockpiling copper less attractive and thus a potential fall in copper prices is our forecast.)
Let us watch and see if we are right.
