Soft data, AI trade in question but some acrophobia too/Commodities/More PMIs/Dollar Tree uses word 'immense'

It was August 1st when weak economic news meant weak stocks and vice versa rather than the market spinning everything into what it would mean for Fed rate cuts. That was the day we saw a jump in initial jobless claims, was followed up the next day by a weak payroll report and was exaggerated that Monday by the yen carry trade reversal. As stated yesterday, that was again on full display but the economic data Tuesday wasn't that much different than expectations both in the US and China. Is it new news that manufacturing around the world is weak? Manufacturing has been in a global recession for about two years now. It seems that the economic worry coincided with stocks getting acrophobia again at the record highs and around 5600 is establishing itself as nose bleed territory in terms of valuations. Also, as mentioned here last week, it’s time for every big cap tech investor to start questioning the ability of these stocks to continue to carry the load, as the AI hype cools down as they all breathe the same economic air as everyone else.

Commodity stocks got slammed yesterday, in case you missed it, and as a bull and owner of some of the stocks, it is always a gut check day. With permission from my friend Adam Rozencwajg, one half of the Goehring & Rozencwajg commodity investment team, I include the chart below from their most recent quarterly letter. It is a ratio chart of a propriety commodity index they created with the Dow Jones going back to 1900, reflecting when one is undervalued or overvalued relative to the other. As seen, commodities are the cheapest vs stocks going back about 125 years, similar to what was seen in the mid 1960's. I remain bullish and long, particularly in energy, uranium, precious metals and ag. 

We did get more PMI's from overseas, including some focused on the service side. The August China Caixin services PMI remained above 50 but slipped .5 pts m/o/m to 51.6. The estimate was 51.8. Caixin said, "Service activity expansion was sustained by rising new business inflows in August according to the latest data. Chinese service providers often linked the expansion of new work to better underlying demand conditions and a widening of service offerings. In line with overall business activity, new work inflows expanded at a softer rate compared to July." More inbound tourism was a bright spot. Also of note, "Although still below the series average, the level of optimism rose for a 2nd successive month to the highest since May."