Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
Join us for a live discussion about the current state of the financial markets with Damien Klassen Head of Investments at Walk The World Funds and Nucleus Wealth. You can ask a question live.
Go to the Walk The World Universe at https://walktheworld.com.au/
We are coming to the pointy end of the action now, with the Nasdaq closing lower on Monday after a choppy session for U.S. equities ahead of a big week of technology earnings reports while oil prices rose and treasury yields edged higher as investors braced for a Federal Reserve interest rate hike.
The S&P 500 see-sawed on Monday and ended close to unchanged.
Meanwhile in Australia the head of APRA, the entity responsible for banking supervision is going, while the local bond market is in pieces.
In currencies, the dollar index, which touched a 20-year high this month, was down slightly and gold also slipped, as did bitcoin.
Concern that rising interest rates will drive the economy into a recession has been escalating as the Fed tightens monetary policy aggressively to bring down the steepest inflation in four decades. Fed Chair Jerome Powell has said that failing to restore price stability would be a “bigger mistake” than pushing the US into a recession, which he has continued to maintain the nation can avoid.
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One characteristic of a Bear market are relief rallies, which start strong, but which also eventually run out of steam. We have seen this during the week, as a gauge of global stocks fell on Friday to end the trading week on a down note after five straight sessions of gains.
In addition, the dollar dipped against a basket of major currencies after soft data on U.S. business activity was released.
Friday was wobbly on Wall Street which posted modest losses in early trading but declines on the S&P 500 accelerated as Big Tech names such as Meta and Alphabet lost ground in the wake of earnings from Snap Inc which plunged 39.08%.
Defensive sectors such as utilities and consumer staples were among the few advancers
“Every rally we have had during this bear market, there have been a number of sharp rallies and then they fade and we set new lows and that has been a pretty consistent pattern here,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “Everybody is looking for the turn, everybody is trying to guess at when we get a sustained rally, and everybody is hoping for one, but to me there is still a lot of unknown ahead of us.”
[CONTENTS]
0:00 Start
0:15 Introduction
0:12 Bear Market Bounces
3:30 Fed and Economic Data
5:40 US Markets 8:20 US Dollar
09:40 Oil
11:10 European Markets
14:00 Wheat Agreement
18:20 Gold
19:30 Asian Markets
20:20 Australian Markets
23:20 NAB Rate Outlook Up
24:30 Outlook
27:25 Crypto
28:00 Summary and Close
Go to the Walk The World Universe at https://walktheworld.com.au/
The latest edition of our finance and property news digest with a distinctively Australian flavour.
In this week’s market review, consider the hangover coming as the punch bowel of cheap funds is taken away. We start as always with the US, go across Europe and Asia, and end in Australia. Why, because like it our not our fate will be largely determined by what happens in the US – which drives the price of money via the US dollar, and China, our main export partner.
The US FOMC raised interest rates in June by 75 basis points in June. And last month, the U.S. central bank also started reducing the size of its enormous balance sheet. Until September, the Fed will be cutting $45 billion a month from its massive holdings, and it will increase to $95 billion, almost twice as much as it did in the previous episode of quantitative tightening. So the value of the Fed’s assets has already peaked, reaching $8.95 trillion in mid-May 2022.
But, although the Fed is tightening its monetary policy, its stance remains accommodative. According to the Taylor rule, the federal funds rate shouldn’t be just between 1.50% and 1.75%, but at least above 5% .
So the U.S. central bank remains behind the inflation curve and would have to raise interest rates much further to combat high inflation. But in the previous Fed’s tightening cycle of 2017-2019 which led to the repo crisis, forced the U.S. central bank to reverse its stance and cut interest rates.
Given how fragile the financial system is and how much indebted the American economy is, it’s almost certain that the current monetary policy tightening will lead to a sovereign-debt crisis or another kind of financial crisis.
[CONTENT]
0:00 Start
0:15 Introduction
00:46 Removing The Punch Bowel
2:45 US Dollar
4:00 Economic Indicators
5:45 US Markets
08:00 Bonds
8:50 European Markets
10:25 Oil and Gold
12:40 Asian Markets
14:00 China Economics
15:30 China Property Bust
19:25 Australian Market
22:00 Crypto Crash
23:00 Conclusion
Go to the Walk The World Universe at https://walktheworld.com.au/
Join us for a live discussion about the current state of the markets with Investment Manager Tony Locantro from Alto Capital, in Perth. You can ask a question live.
https://www.altocapital.com.au/
Go to the Walk The World Universe at https://walktheworld.com.au/
Well, those following my channel over recent years will know that I have been quite skeptical of Crypto wave, and while Crypto has gone through several major drops in its history, this time could be different. I was not impressed with so called celebrities starting spruiking them, including Kim Kardashian, but when financial mainstream started getting involved, my concerned grew. In the US, Fidelity’s plans to offer Bitcoin in 401(k)s – their equivalent of superannuation – could impact an entire generation.
Its worth recalling the sector spiked to around $3 trillion in total assets last November, before plunging to less than $1 trillion, with Bitcoin and a range of altcoins plunging from record highs.
What started this year in crypto markets as a “risk-off” bout of selling fueled by a Federal Reserve suddenly determined to rein in excesses has exposed a web of interconnectedness that looks a little like the tangle of derivatives that brought down the global financial system in 2008. The collapse of the Terra ecosystem — a much-hyped experiment in decentralized finance — began with its algorithmic stablecoin losing its peg to the US dollar, and ended with a bank run that made $40 billion of tokens virtually worthless. Crypto collateral that seemed valuable enough to support loans one day became deeply discounted or illiquid, putting the fates of a previously invincible hedge fund and several high-profile lenders in doubt.
The recent crypto plunge, with Bitcoin down about 70% from its peak, is fueling widespread financial troubles for companies involved in the space. Lenders like Celsius Network, Babel Finance and Vauld have suspended withdrawals, while firms such as Coinbase Global Inc. are cutting jobs. This is what is now being called a crypto winter – but will spring ever come?
Go to the Walk The World Universe at https://walktheworld.com.au/
In today’s show, we review the weeks market action, starting in the US – by far the most influential market, followed by Europe, Asia and Australia. There is no place to hide. Wealth is being destroyed. And there is no end in sight. Data is flagging recession, as central banks continue to raise rates and given the astronomical debt burden out there this is a big deal.
Even conservative investment strategies are being hit. “This is a train wreck,” says Alex Dunnin, executive director of research house Rainmaker Group. “When a traditionally conservative strategy is getting the worst returns then all bets are off. It doesn’t matter where you go, almost everyone will be in pain.”
The S&P 500 notched its worst start since 1970, plunging 20.6% between January and June. The Dow had its largest first-half drop since 1962, and the Nasdaq Composite had its largest percentage decline ever. And US Stocks slipped over the five days, with the S&P 500 erasing part of its rally in the previous week. Down more than 2%, the index just endured its 11th drop in 13 weeks.
All three indexes posted losses for the week. Despite this Wall Street rallied to close higher on Friday in light trading, with investors heading into the long holiday weekend and embarking on the second half of year looking for the next market-moving catalyst. All major groups in the S&P 500 rose, while the tech-heavy Nasdaq 100 underperformed. Treasuries surged after an ugly first half as weak economic data added to recession fears.
The US economic data was frankly horrid this week. An influx of data showing softer consumer spending, sagging sentiment and subdued manufacturing suggest a US economy with a more fragile foundation, prompting several forecasters to lower their estimates for growth.
Strategists at Goldman Sachs told clients on Thursday that stocks could keep falling later this year since “equities are pricing only a mild recession” and more companies will likely begin reducing their earnings expectations. In the event of a recession, Goldman’s team sees the S&P 500 dropping to 3,600, or 4.9% below Thursday’s close.
[CONTENT]
0:00 Start
0:15 Introduction
2:23 US Weak Economic Data
8:22 GDP Forecast: Down
9:00 Bond Yields
11:00 Buying The Dip
13:50 US Markets
16:00 Oil, Gold and Silver
17:00 Euro-zone Inflation Up
19:18 European Markets
20:00 Asian Markets And China Bonds
22:25 Australian Markets
24:40 Crypto Down
25:47 Tough Times Ahead
Go to the Walk The World Universe at https://walktheworld.com.au/
Join us for a live discussion about the current state of the markets with Damien Klassen Head of Investments At Nucleus Wealth And Walk The World Funds.
You can ask a question live via YouTube Chat!
Go to the Walk The World Universe at https://walktheworld.com.au/
I caught up with Paul Feeney from Otivo who just released survey results highlighting the extent of wealth destruction we have seen since the start of the year, across multiple asset classes. We discussed the implications of this, and specifically what we can do to react. What elements can we control?
The good news that even now, there are things which can help to ensure a better outcome in the future. No need to panic.
Paul talks about how the Otivo advice platform offers a lens to assist in optimization of a wealth building strategy.
You can try the platform for free, and get a discount on signing up. DFA Viewers can use the code OtivoDFA when signing up for a subscription in the payment section of the Otivo sign-up to activate a 20% discount.
Note: DFA does not get any commercial benefit if you do sign up or try the platform.
Go to the Walk The World Universe at https://walktheworld.com.au/
As expected, U.S. equities tumbled on Monday, with the S&P 500 confirming it is in a bear market, thanks to expected aggressive interest rate hikes by the Federal Reserve that would push the economy into a recession. Markets have been under pressure this year as climbing prices, including a jump in oil prices due in part to the war in Ukraine, have put the Fed on track to take strong actions to tighten its monetary policy, such as interest rate hikes. The Fed is scheduled to make its next policy announcement on Wednesday and investors will be highly focused on any clues for how aggressive the central bank intends to be in raising rates.
The latest pickups in consumer prices and inflation expectations will probably spur Federal Reserve officials to consider the biggest interest rate increase since 1994 when they meet this week, after chairman Jerome Powell previously signalled a smaller move was the likely outcome.
In fact The benchmark S&P index has fallen for four straight days, with the index now down more than 20% from its most recent record closing high to confirm a bear market began on Jan. 3, if you use the standard definition.
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.