Our work shows the OECD indicator is the best of the major leading indicatorsand should be looked at on a six-month change basis. It is at its best whenpredicting turning points in resources performance, which it does accurately75% of the time. This time around it is pointing to a bottom in December 2010.
Investor positioning still too cyclical.
Our global fund manager survey shows investors are still overweight cyclicalassets even though they have changed their view of the recovery. This will needto change in order for the market to bottom. Low volumes suggest that manyinvestors stood back during the market instability, and they may now use calmermarkets to undertake sector rotation.
Understanding China 2.0.
Investors need to have adjusted to the new reality in China before markets canbottom also.
In China 2.0 investment is being actively discouraged, while the focus is on boosting consumption. Today’s Chinese crude steel production data show that this is happening very rapidly and the impact on commodity demand will be severe.