We’re launching an institutional research product next week, but we thought this was too interesting to not share right now. First edition will be public so you can read more.
Last week we saw the largest divergence between China’s Caixin PMI & official PMI, as Caixin new orders ripped. We know that Caixin is primarily small/mid-sized businesses (500 cos) on the eastern border dependent on trade, while official measures 3000 co’s across all of China. 
Interestingly, the global tech communications equipment PMI has also ripped higher with Caixin, both supporting the global PMI, which did not confirm the same strength. Why would we see such strength both out of China and tech communications equipment? Tariff front loading.
As you can see below, US semiconductor exports have historically been very correlated with the ISM, or the global business cycle. Recently this has completely diverged, as China has been forced to front load purchases due to tariffs.
This is also why the semiconductor stocks have completely diverged from earnings and the global cycle, as they have been focused on the front loading of demand from China.
That said, the front loading is a short-term phenomenon, and actual demand will not bridge the gap once it stops given our leads. What we do know from this is the front loading has caused the global PMI to bounce (Caxin rip); however, we still see risk there given our leads.
Interestingly semiconductors are not the only sector that is seeing large historical upticks, but it does provide some explanation for how global equities have risen significantly YoY with the global data continuing to deteriorate.
"Some of the demand that we got in the 4th fiscal quarter was inventory builds from China" - $MU
