Walking The Uncertainty Tightrope Towards Who Knows What Next!

This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto on the way. To remind our loyal viewer, this is a data rich show, as I get the weeks developments into perspective.

Market trends are rarely linear for long, they naturally ebb and flow. Despite the flaring conflict in the middle east, and the US election just a month away now, MSCI’s global equities index rose on Friday, though for the week, it showed a roughly 0.7% decline, while the Dow closed at fresh record highs and the US dollar climbed to its highest level since mid-August as investors heaved a sigh of relief after a surprisingly strong U.S. labor market report.

Oil prices rose and settled with their biggest weekly gains in over a year on the mounting threat of a region-wide war in the Middle East, but gains were limited as U.S. President Joe Biden discouraged Israel from targeting Iranian oil facilities. Investors remained anxious about how Israel would respond after Iran fired missiles at it on Tuesday. Supreme Leader Ayatollah Ali Khamenei said earlier that Iran and its regional allies will not back down.

The Australian share-market snapped a three-week winning streak on Friday, as the escalating conflict in the Middle East sent traders fleeing equities and pulled shares down from record highs touched a week earlier. The S&P/ASX 200 ended Friday’s 0.7 per cent lower at 8150 points, dragging the score to a weekly loss of 0.8 per cent, its first since early September. Of the ASX’s 11 sectors, nine ended the session lower.

The IMF this week gave a mixed assessment of recent government budgets and whether Treasurer Jim Chalmers and his state counterparts were helping the RBA to tame Australia’s worst inflation outbreak in decades.

Finally, in crypto, Bitcoin (BTC) dropped over 5% this week as the escalating conflict in Gaza and Lebanon fuelled flows into safe-haven assets.

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Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Walking The Uncertainty Tightrope Towards Who Knows What Next!
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Damp Squib Of A Rate Cut Has Markets On Watch!

This is our weekly market update, designed to help me digest what is happening, starting in the US, probably the most consequential market in the world, then we move to Europe, Asia and end in Australia and also cover commodities and crypto on the way.

On Friday shares on Wall Street were mixed in a narrow range as investors continued to assess the outlook for US interest rates. Why 50 basis points, not 25, and was this a minor course correction, aimed at bringing a soft economic landing, or a sign the FED had left things too long and was trying to head off a lurking recession risk? And was there a hint of political here ahead of the US election? It’s really not clear. And as for that mythical R star – the level at which rate neither detract from, or add to growth, remains like the quest for the holy grail.

One top Federal Reserve policymaker signalled a willingness to cut rates at a fast pace. Federal Reserve governor Christopher Waller told CNBC that “inflation is running softer than I thought”. He’s now estimating that the Fed’s favoured gauge of inflation — the personal consumption expenditures price index — has risen over the last three months at an annualised rate of less than 1.8 per cent, which is below the Fed’s target of 2 per cent.

But separately, Federal Reserve governor Michelle Bowman said she was concerned this week’s 50-basis-point rate cut was “premature”, countering expectations of another similar move anytime soon. “I believe that moving at a measured pace toward a more neutral policy stance will ensure further progress in bringing inflation down to our 2 per cent target.” Bowman dissented at this week’s meeting, the sole policymaker to do so, voting for a quarter of a percentage point reduction instead.

We know the FED will continue to be data dependent and next week’s US data highlight will arrive on Friday with August’s PCE report.

Gold’s reaction to the most-dovish Fed decision in years proved lackluster. Futures were last at 2647.20, up 1.39% across the week. Plenty of traders thought gold would surge after an outsized rate cut birthing a new cutting cycle. And with top Fed officials projecting many more cuts, it is going to be big. Gold did rally initially on that revelation, but quickly reversed into a larger intraday loss. Fed rate cuts are bullish for gold, but speculators’ gold-futures positioning is overextended.

Australian shares scaled another record high on Friday, tracking a global wave of optimism that the US Federal Reserve will deliver a much-hoped-for soft landing for the world’s largest economy. The S&P/ASX 200 Index added 0.2 per cent to 8209.5, the highest closing level in its history. It climbed to an intraday peak of 8246.2 – setting a record for the sixth straight session. On the week, it gained 1.3 per cent.

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Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Damp Squib Of A Rate Cut Has Markets On Watch!
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DFA Live Q&A HD Replay: Tony Locantro: In A Time Of Financial Crisis

This is an edited version of a live discussion with Investment Manager Tony Locantro, as we kick over the current issues facing markets and households. Tony offers several financial services, such as investment management, financial planning, stock selection and fundraising. Tony has helped countless investors and organisations with strategic investment strategies over the last two decades.

His understanding of market psychology has ensured valued investment strategies in bull and bear markets. Because of his ability to understand the small cap market space, Tony has been featured in dozens of well known publications across Australia, such as Small Caps, Sky Business, Digital Finance Analytics, and many more.

Original stream and chat here: https://youtube.com/live/t8AcR69APfM

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Go to the Walk The World Universe at https://walktheworld.com.au/

https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ for our One to One Service.

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
DFA Live Q&A HD Replay: Tony Locantro: In A Time Of Financial Crisis
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Markets Gain Ground Despite Choppy Trading!

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia. And let me say this is a calm and methodical summary, not a shouty content light thing which might be all the rage on some social media, but which for me does not cut the mustard, as I use this to help me understand what is really going on.

Well riotous August ended with global stocks edging higher in choppy trading on Friday, making it the fourth consecutive month of gains. MSCI’s world share index rose 0.77%, for a 2.40% monthly gain. This despite some questions over AI leading to a broadening of interest in other sectors, a bout of heavy selling in early August, and more support for gold as a safe haven. All this despite U.S. economic data that helped the dollar snap a weeks-long losing streak. US markets will be closed on September 2 for the Labor Day holiday so we can expect rudderless trading on Monday.

The S&P 500 ended the final session of the week higher, with a late spike, as the latest batch of data pointed to an ever-resilient US consumer, potentially slowing the pace of rate cuts. The benchmark S&P 500 closed August with a 2.3 per cent gain for the month. It’s now up 18.4 per cent so far this year and is within 0.4 per cent of the all-time high it set in July.

In Europe the Stoxx index closed up 0.09% after touching a record intraday high while Britain’s FTSE index hit over a three-month high on Friday, clocking gains for the topsy-turvy month, with real estate shares in the lead as interest rate-cut hopes held firm, while energy shares tumbled on demand concerns, capping intra-day gains. It still registered its second straight monthly gain and third consecutive weekly advance.

In Asia, Asian stocks rose on Friday as technology stocks recovered from Nvidia-induced losses, while month-end bargain buying saw Chinese shares rebound from more-than six-month lows. But most regional markets were still headed for a loss in August, as they struggled to recover from debilitating losses clocked at the beginning of the month.

The Australian share market finished near a record high on Friday, as higher oil prices and a final flurry of better than expected results from earnings season helped secure the benchmark’s third straight week of gains.

But once again, more questions than answers.

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Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Markets Gain Ground Despite Choppy Trading!
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DFA Live Q&A HD Replay: Asset Inflation, Rate Cuts & Crypto: With Adam Stokes

This is an edited version of a live discussion with Crypto evangelist Adam Stokes as we examine the recent changes in the market, as gold rockets to new highs, even as rate cuts and QT is under way. Where is the real value of money, and how does Crypto play into this?

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ for our One to One Service.

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
DFA Live Q&A HD Replay: Asset Inflation, Rate Cuts & Crypto: With Adam Stokes
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Return To Plan A (For Now) Says The Market As New Data Swings!

This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, while also covering the action in commodities and crypto along the ways.

My analogy of traders on a boat, running from one side of the deck to the other still holds, as the recession iceberg melts away for now, and an immaculate US soft landing is back in vogue. The change in sentiment was driven by a flurry of data which showed US economic resilience, and this drove stocks to their best week this year, coupled with dip buyers stepping in after the recent rout. So, Wall Street posted its best seven-day run in almost two years while the VIX slid back to 14.80.

Of course, traders have struggled to forecast where the economy is headed – and the recession fears that helped drive the recent pullback could resurface again just as quickly as they faded. On top of that, the US elections and geopolitical tensions are adding other elements of uncertainty.

But beneath the surface, there are some reassuring signals. Specifically, the latest jobs data was better than previous ones, the CPI data showed a drift in the right direction, along with producer prices, consumer sentiment improved with the August University of Michigan consumer sentiment survey reading of 67.8, up from July’s 66.4. and retail sales were up. Just don’t mention the poor construction data with weak July housing starts and building permits data. Central bankers are being quote, data dependent, so no surprise then when new data arrives traders change tack.

Federal Reserve Bank of Chicago President on Friday told National Public Radio that the U.S. economy is not showing signs of overheating, so central bank officials should be wary of keeping restrictive policy in place longer than necessary. “You don’t want to tighten any longer than you have to,” Goolsbee said. “And the reason you’d want to tighten is if you’re afraid the economy is overheating, and this is not what an overheating economy looks like to me.”

Note also the earlier selloff hit a relatively small slice of the market, with nowhere near the breadth of the routs set off by the Fed’s rate hikes, the pandemic and other pivotal events. And while valuations are at risk of another recalibration if the economy does wind up sputtering, the S&P 500 during the recent retreat held above a threshold that – to technical analysts, at least – telegraphs investors’ continued confidence.

The Dow ended up 0.24%, the S&P 500 rose to around 5,555 up 0.2% For the year, the S&P 500 is up more than 16% and is within about 2% from its July all-time closing high. The NASDAQ rose 0.2%. Most megacaps gained, with Nvidia leading the charge, up 1.4% and has bounced more than 20%, while the Philadelphia SE Semiconductor index has gained more than 14% from recent lows. Small-cap shares, which had been strong performers in July, have also recovered from recent lows, with the Russell 2000 up nearly 5%. Nike had its longest winning streak in more than eight years and up 0.88% on the day though Applied Materials sank 1.86% after a sales forecast that disappointed investors looking for a bigger payoff from artificial intelligence spending. If you are an AI fan, like Wedbush, then the outlook looks rosy, saying the tech sector is on the brink of substantial growth, underpinned by the expanding influence of AI. Just remember Cisco, though. The firm emphasized the foundational role of cloud and AI technologies in the ongoing “4th Industrial Revolution.”

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Return To Plan A (For Now) Says The Market As New Data Swings!
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Remember Folks, Buy Low, Sell High – Especially Now!

This is our latest weekly market update, where we check in the markets across the USA, Europe Asia and Australia and also cover commodities and crypto.

This past week once again was full of swings, up earlier, then down, and then an upswing on Friday, though still to end lower once again across the week. It is worth recalling that to make money in stocks the idea is to buy low, and sell high. In recent times we saw investors piling into already over expensive tech stocks – essentially buying high and hoping for higher. Some of that is now reversing. And there is probably more to come.

The US markets did get a boost at the end of a wild week after key economic data bolstered speculation the Federal Reserve will set up the stage for a rate cut in September as the volatility index slide 11 per cent from recent highs.
While every major group in the S&P 500 rose on bets that the start of the Fed easing cycle will keep fuelling the outlook for Corporate America, once again, smaller firms largely beat the cohort of tech megacaps — extending their July surge to about 10 per cent.

The S&P 500 CLOSED 1.11% higher, the DOW was up 1.64% and the NASDAQ rose 1.03 per. The Russell 2000 of small caps climbed 1.65 per cent, while the gauge of the “Magnificent Seven” megacaps added just 0.7 per cent. The S&P Financials were up 1.49%.

The Australian dollar fell in its longest stretch of losses in almost a year as concerns about China’s economic recovery continue to weigh on the currency and commodity prices. The Aussie – which had been rallying on the interest rate differentials between Australia and the US – has not been immune to the latest sell-off in metals prices. It was last at 65.49. But AMP’s chief economist Shane Oliver is also sticking by his forecast, projecting the Aussie to reach US70¢ by the end of the year.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Remember Folks, Buy Low, Sell High – Especially Now!
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Buckle Up; The Markets Just Got Interesting!

Markets Are Clearly Confused. The S&P 500 closed sharply lower on Wednesday, suffering its biggest one day lost since 2022 as tech stocks nosedived following underwhelming second-quarter earnings from heavyweights Alphabet and Tesla.

After the recent political machinations in America, with Trump in the ascendency, followed by the switch from Biden to Harris, the Trump trade got reversed. In Big Tech, the rotation from AI stocks has continued, as players like Google reportedly are spending even more Capax than expected investing in AI, without a clear uptick in revenue, while Tesla pushed out some of their new business plans, while reporting weaker sales revenue.

Then we have the prospect of US rate cuts now emerging in September, having at the start of the year priced in up to six cuts, a month ago considering a rise as inflation appeared more sticky, but now economic cracks may suggest a series of cuts soon.

And in China, data continues to be weak, after the recent conflab there did little to clarify Government support for the weak economy, with speculation rise that they will wait for the US election result.

And while rate cuts continued in Canada yesterday, and are expected in Europe, and the UK, in appears rate rises are more likely in Japan and Australia.

Finally, we have the normal summer thinner volumes, and then the prospect of the typically wobbly markets we often see in September and October, before a run up towards the end of the year.

So traders are going cautious, taking money off the table, and into safe havens, switching from the high tech bet, and watching for the next moves.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Buckle Up; The Markets Just Got Interesting!
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Just The Start As Markets Are Rocked By Rotations, BSOD, Politics, And More…

In our latest weekly market update, we start in the US, move to Europe and Asia and end in Australia as well as covering commodities and crypto, as a way of digesting all that has happened this past few days.

This past week, was again packed full of contradictory signals, with World stock indexes falling on Friday as a global cyber outage rattled investors by disrupting operations across multiple industries, while the dollar climbed alongside Treasury yields. All three US indices fell, as the S&P 500 and Nasdaq registered their biggest weekly percentage declines since April. while Gold briefly traded below $US2400 an ounce, oil fell 3 per cent to trade below $US83 a barrel and iron ore slid 1 per cent, while the second quarter earnings season is off to a mixed start.

A growing number of analysts and strategists are telling clients there is fragility among the stock giants having touched highs recently. Now the dilemma for investors is after 10 months of a big rally, should investors stick with their big winners or change tack remembering that history says wealth is created by a tiny number of companies, and most stocks will make investors poorer.

The market is overbought but analysts are split on whether the strong breadth improvements will be bullish for stocks moving forward or a rotation away from technology where most of the growth has been means markets will fall.

As with global stocks, concentration in the Asia-Pacific region is at 35-year highs, and CBA (which has been the fourth-largest contributor to returns in the region in the past 20 years, on BofA’s numbers) has been a prime mover; it is one of just eight stocks that have delivered 80 per cent of the gains in the MSCI Asia Pacific (excluding Japan) index this year.

There will be more madness ahead!!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Just The Start As Markets Are Rocked By Rotations, BSOD, Politics, And More…
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Rotation To A “Tech-Wreck” Replay?

My Saturday show highlighted the start of the rotation from tech stocks to the broader market, as exemplified in the trends in the NASDAQ and the Small Caps 2000. This trend has continued, and on Wednesday it went into overdrive as the world’s largest technology companies got hammered as concern about tighter US restrictions on chip sales to China spurred a selloff in the industry that has led the bull market in stocks.

I was around for the dot-com bubble, a stock market bubble that ballooned during the late-1990s and peaked on Friday, March 10, 2000. This period of market growth coincided with the widespread adoption of the World Wide Web and the Internet, resulting in a dispensation of available venture capital and the rapid growth of valuations in new dot-com startups.

One common theme is “its different this time”. You cannot apply normal valuation rules, they do not apply. Well, of course the recent AI trends have been driven by confidence of a new business era, and people again are talking about new rules, despite the fact that companies like NVIDA have sold the lions share of their cards to established and cashed up big tech companies like Microsoft, and others in a weird feedback loop. The real benefits of AI for normal downstream businesses are still to come.

So are we seeing the start of another tech-wreck? I think its too soon to tell.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Rotation To A “Tech-Wreck” Replay?
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