Tag: Market Update

Do The Recession Sirens Call? [Podcast]

Our latest weekly market update.

Last week was quite a week, with the start driving markets higher in an AI induced hallucination, before the reality of rates higher for longer hit home, thanks to Federal Reserve Chairman Jerome Powell’s testimony in which he signaled more interest rate hikes ahead but vowed the central bank would proceed with caution. And the Bank of England lifted 0.5% to 5%, a 15 year high, as recession talk came to the fore, supported by a range of weak PMI’s.

The 10-Year-2-Year curve is burrowing southward, perhaps for a test of the inversion low earlier this year. While people tend to worry that a yield curve inversion is a trigger to economic recession, it is actually the steepening that follows that usually brings the trouble, whether it be inflationary or deflationary.

Japanese stocks slide after inflation grows more than expected Japan’s Nikkei 225 index slid 1.7%, while the TOPIX fell 1.5% after data showed consumer price index inflation grew more than expected in the 12 months to May. While core inflation read lower from the prior month, a reading that showed inflation excluding food and fuel costs surged to a 42-year high in May, indicating that underlying Japanese inflation remained high. The trend points to mounting pressure on the Bank of Japan to tighten policy, even as the bank reiterated that it has no plans to alter its ultra-loose policy in the near future.

In Australia, a sharemarket sell-off gathered pace through Friday, erasing a week’s worth of gains for the S&P/ASX 200, as energy producers headlined the falls on a softening oil price. The benchmark index fell 1.3 per cent, to 7099.2, extending the day-earlier 1.6 per cent decline and leaving the market at its lowest since it closed at 7091.3 points on May 31.

The worst-performing sector was energy . The real estate and banking sectors also declined as investors worried about that the strength of the economy as the Reserve Bank of Australia lifts interest rates higher.

“The risk of recession in Australia is now very high,” said Shane Oliver, the chief economist at AMP. “Our assessment remains that the RBA has already done enough to slow the economy and bring inflation back to target, and we are seeing clear evidence of slowing demand in terms of falling real retail sales, falling building approvals, slowing plans for growth in business investment, slowing GDP growth and early indications of a slowing jobs market.”

The outperformance of Bitcoin recently has been tied in part to a filing last week from BlackRock, the world’s largest asset manager, seeking approval for a spot-bitcoin ETF. If approved, it would be the first of its kind, and many experts believe it would increase accessibility and create demand for the asset. But So far dozens of attempts have been made to get a spot-bitcoin ETF approved but all have failed, and the SEC has not shown signs yet that it will back down.

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
Do The Recession Sirens Call? [Podcast]
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Do The Recession Sirens Call?

Our latest weekly market update.

Last week was quite a week, with the start driving markets higher in an AI induced hallucination, before the reality of rates higher for longer hit home, thanks to Federal Reserve Chairman Jerome Powell’s testimony in which he signaled more interest rate hikes ahead but vowed the central bank would proceed with caution. And the Bank of England lifted 0.5% to 5%, a 15 year high, as recession talk came to the fore, supported by a range of weak PMI’s.

The 10-Year-2-Year curve is burrowing southward, perhaps for a test of the inversion low earlier this year. While people tend to worry that a yield curve inversion is a trigger to economic recession, it is actually the steepening that follows that usually brings the trouble, whether it be inflationary or deflationary.

Japanese stocks slide after inflation grows more than expected Japan’s Nikkei 225 index slid 1.7%, while the TOPIX fell 1.5% after data showed consumer price index inflation grew more than expected in the 12 months to May. While core inflation read lower from the prior month, a reading that showed inflation excluding food and fuel costs surged to a 42-year high in May, indicating that underlying Japanese inflation remained high. The trend points to mounting pressure on the Bank of Japan to tighten policy, even as the bank reiterated that it has no plans to alter its ultra-loose policy in the near future.

In Australia, a sharemarket sell-off gathered pace through Friday, erasing a week’s worth of gains for the S&P/ASX 200, as energy producers headlined the falls on a softening oil price. The benchmark index fell 1.3 per cent, to 7099.2, extending the day-earlier 1.6 per cent decline and leaving the market at its lowest since it closed at 7091.3 points on May 31.

The worst-performing sector was energy . The real estate and banking sectors also declined as investors worried about that the strength of the economy as the Reserve Bank of Australia lifts interest rates higher.

“The risk of recession in Australia is now very high,” said Shane Oliver, the chief economist at AMP. “Our assessment remains that the RBA has already done enough to slow the economy and bring inflation back to target, and we are seeing clear evidence of slowing demand in terms of falling real retail sales, falling building approvals, slowing plans for growth in business investment, slowing GDP growth and early indications of a slowing jobs market.”

The outperformance of Bitcoin recently has been tied in part to a filing last week from BlackRock, the world’s largest asset manager, seeking approval for a spot-bitcoin ETF. If approved, it would be the first of its kind, and many experts believe it would increase accessibility and create demand for the asset. But So far dozens of attempts have been made to get a spot-bitcoin ETF approved but all have failed, and the SEC has not shown signs yet that it will back down.

http://www.martinnorth.com/

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

Markets Face Reality For Now, As AI Deceives…. [Podcast]

U.S. stocks closed lower on Wednesday as Federal Reserve Chairman Jerome Powell’s congressional testimony reinforced the central bank’s objective to rein in inflation as he hinted at the likelihood of further interest rate hikes.

At the start of this year, markets were expecting a bumpy ride on the markets. Yet, the S&P 500 is up by almost 15% this year, while the tech-heavy Nasdaq 100 Index has advanced by almost twice that amount.

While it’s still not clear quite what great things have happened in the last six months to justify the extra optimism, it’s obvious that the excitement over AI has been essential to the positive surprise. The ChatGPT artificial intelligence service was launched just as strategists began unveiling their 2023 predictions, at a time when few at the time saw this artificial intelligence-charged rally coming.

But, if you exclude the most prominent AI stocks, the rest of the S&P 500 is broadly on course for the year people expected, and since then rate expectations are higher because inflation is more embedded.

The Bank of England lifted rates again today, At its meeting ending on 21 June 2023, the MPC voted by a majority of 7–2 to increase Bank Rate by 0.5 percentage points, to 5%. Two members preferred to maintain Bank Rate at 4.5%. In Australia, the RBA needs to see unemployment rising to try to grip inflation, as rates stay higher for longer.

As a result markets are likely to be weaker for longer, to the point where some are arguing we are seeing a re-run of the 1999 dot com boom bust. We will see.

http://www.martinnorth.com/

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

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Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Markets Face Reality For Now, As AI Deceives…. [Podcast]
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Just Don’t Look Down! [Podcast]

U.S. shares struck new highs for the year on Friday and helped lift world stocks to a 13-month peak, as rising bets that the Federal Reserve will skip a rate hike next week overshadowed worries about U.S. markets being drained of cash.

Surging enthusiasm for technology giants building consumer products based on artificial intelligence catapulted the US benchmark S&P 500 into a technical bull market on Thursday. On Friday, the blue-chip bellwether index was up more than 20 per cent from its lows and is at its highest level since August, with the tech-heavy Nasdaq index chasing seven straight weeks of gains to soar 27.4 per cent year to date.

“As of today, the S&P 500 is back in a bull market,” said Arthur Hogan, chief market strategist at Briley Wealth, noting that the index finished Thursday with a 20% gain off its recent lows. “The one thing that could tip over the apple cart is an over-aggressive Fed.”

“It’s maybe the most hated bull market in the history of bull markets,” said Tim Holland, chief investment officer of investment platform Orion OCIO.

“Sentiment was terribly depressed going into year-end and still remains on the bearish side.”

And just remember how narrowly based this surge is though as hot money seeks a home in an uncertain world.

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 Don’t Look Down! [Podcast]
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Just Don’t Look Down!

U.S. shares struck new highs for the year on Friday and helped lift world stocks to a 13-month peak, as rising bets that the Federal Reserve will skip a rate hike next week overshadowed worries about U.S. markets being drained of cash.

Surging enthusiasm for technology giants building consumer products based on artificial intelligence catapulted the US benchmark S&P 500 into a technical bull market on Thursday. On Friday, the blue-chip bellwether index was up more than 20 per cent from its lows and is at its highest level since August, with the tech-heavy Nasdaq index chasing seven straight weeks of gains to soar 27.4 per cent year to date.

“As of today, the S&P 500 is back in a bull market,” said Arthur Hogan, chief market strategist at Briley Wealth, noting that the index finished Thursday with a 20% gain off its recent lows. “The one thing that could tip over the apple cart is an over-aggressive Fed.”

“It’s maybe the most hated bull market in the history of bull markets,” said Tim Holland, chief investment officer of investment platform Orion OCIO.

“Sentiment was terribly depressed going into year-end and still remains on the bearish side.”

And just remember how narrowly based this surge is though as hot money seeks a home in an uncertain world.

http://www.martinnorth.com/

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

The Market’s Tug-O-War Gets More Intense! [Podcast]

U.S. stocks closed higher on Friday after a labor market report showing moderating wage growth in May indicated the Federal Reserve may skip a rate hike in two weeks, while investors welcomed a Washington deal that avoided a catastrophic debt default with the Senate passing a bill late on Thursday to lift the government’s $31.4 trillion debt ceiling avoided what would have been a catastrophic, first-ever default.

As an old TV show “Soap” used to say – confused? You will be… and this is certainly appropriate for the current complex market dynamics. The market has been rallying since October last year, hoping the Fed would pause its rate-hiking campaign and start cutting rates in the latter half of this year.

“With this broadening rally, #markets are embracing another upside surprise on the #economy,” Mohamed El-Erian said in a tweet. “Underlying this is a lower risk of recession. Indeed, and as I’ve argued before, there is no need for the economy to fall into recession unless it is hit with another Fed policy error.”

But the bullish case hinges upon the economy avoiding a recession, Employment remaining strong, and wages supporting consumption, elevated corporate profit margins supporting higher market valuations and the Fed will “pause” the tightening campaign as inflation falls.

Yet if the economy avoids a recession and employment remains strong, the Fed has no reason to cut rates. Sure, the Fed may stop hiking rates, but if the economy is functioning normally and inflation is falling, there is no reason for rate cuts.

And sustained economic growth and low unemployment will keep inflation elevated, leaves the Fed little choice but to become more aggressive in tightening monetary accommodation further.

Two other factors to also consider are first the narrow base of the current rally, the mirror image of last year when big tech was on the nose, now investors holding shares of the massive tech and growth companies leading the charge are debating whether to cash out or stay on for the ride. And second the lag effect of past rate rises, which typically take 18-24 months to work though to the real economy, and the split performance of goods and services inflation and potential impact.

A record $US8.5 billion flowed into tech stocks in the latest week, data from BofA Global Research showed, as investors piled into a rally that has seen the tech-heavy Nasdaq 100 gain 33 per cent in 2023. The benchmark S&P 500 has risen 11.5 per cent this year and stands at a 10-month-high. Big movers include shares of Nvidia, which are up about 170 per cent this year, while Apple and Microsoft, the top two US companies by market value, have both climbed nearly 40 per cent.

The S&P 500 advanced for a third week in a row, powered to the brink of a bull market by a handful of tech behemoths such as Nvidia, Alphabet and Microsoft. The Nasdaq 100 jumped 1.8 per cent, capping a sixth straight weekly gain. The tech-heavy Nasdaq index surged to a 13-month intraday high and posted its sixth-straight week of gains that marked its best winning streak since January 2020. Underneath the surface, value shares lagged growth in a seventh week of underperformance.

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
The Market’s Tug-O-War Gets More Intense! [Podcast]
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The Market’s Tug-O-War Gets More Intense!

U.S. stocks closed higher on Friday after a labor market report showing moderating wage growth in May indicated the Federal Reserve may skip a rate hike in two weeks, while investors welcomed a Washington deal that avoided a catastrophic debt default with the Senate passing a bill late on Thursday to lift the government’s $31.4 trillion debt ceiling avoided what would have been a catastrophic, first-ever default.

As an old TV show “Soap” used to say – confused? You will be… and this is certainly appropriate for the current complex market dynamics. The market has been rallying since October last year, hoping the Fed would pause its rate-hiking campaign and start cutting rates in the latter half of this year.

“With this broadening rally, #markets are embracing another upside surprise on the #economy,” Mohamed El-Erian said in a tweet. “Underlying this is a lower risk of recession. Indeed, and as I’ve argued before, there is no need for the economy to fall into recession unless it is hit with another Fed policy error.”

But the bullish case hinges upon the economy avoiding a recession, Employment remaining strong, and wages supporting consumption, elevated corporate profit margins supporting higher market valuations and the Fed will “pause” the tightening campaign as inflation falls.

Yet if the economy avoids a recession and employment remains strong, the Fed has no reason to cut rates. Sure, the Fed may stop hiking rates, but if the economy is functioning normally and inflation is falling, there is no reason for rate cuts.

And sustained economic growth and low unemployment will keep inflation elevated, leaves the Fed little choice but to become more aggressive in tightening monetary accommodation further.

Two other factors to also consider are first the narrow base of the current rally, the mirror image of last year when big tech was on the nose, now investors holding shares of the massive tech and growth companies leading the charge are debating whether to cash out or stay on for the ride. And second the lag effect of past rate rises, which typically take 18-24 months to work though to the real economy, and the split performance of goods and services inflation and potential impact.

A record $US8.5 billion flowed into tech stocks in the latest week, data from BofA Global Research showed, as investors piled into a rally that has seen the tech-heavy Nasdaq 100 gain 33 per cent in 2023. The benchmark S&P 500 has risen 11.5 per cent this year and stands at a 10-month-high. Big movers include shares of Nvidia, which are up about 170 per cent this year, while Apple and Microsoft, the top two US companies by market value, have both climbed nearly 40 per cent.

The S&P 500 advanced for a third week in a row, powered to the brink of a bull market by a handful of tech behemoths such as Nvidia, Alphabet and Microsoft. The Nasdaq 100 jumped 1.8 per cent, capping a sixth straight weekly gain. The tech-heavy Nasdaq index surged to a 13-month intraday high and posted its sixth-straight week of gains that marked its best winning streak since January 2020. Underneath the surface, value shares lagged growth in a seventh week of underperformance.

http://www.martinnorth.com/

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

Another Dose Of “Hope-ium” Kicks Markets Higher! [Podcast]

US stocks rose broadly in their last trading day before a long weekend, despite painfully slow progress on debt ceiling negotiations and disappointing inflation data. Chip stocks surged for a second straight day on optimism about artificial intelligence.

Investors were closely watching debt ceiling talks as Biden and McCarthy still seemed at odds over several issues heading into the long weekend, with the U.S. stock market closed on Monday for the Memorial Day holiday. but strategists warned there was still a prospect of a sell-off if debt ceiling negotiations break down. Any agreement would have to pass the Republican-controlled House of Representatives and the Democratic-controlled Senate, with the June 1 deadline fast approaching.

The S&P 500 climbed 1.30% to end at 4,205.45 points. The Nasdaq gained 2.19% at 12,975.69 points, while Dow Jones Industrial Average rose 1.00% to 33,093.34 points. This means the Dow Jones Industrial Average ended a five-day losing streak, while the Nasdaq Composite Index and S&P 500 closed at their highest levels since August 2022, with the S&P 500 above 4,200 points. And for the week, the S&P 500 rose 0.3%, the Dow fell 1.0% and the Nasdaq jumped 2.5%.

But Data showed U.S. consumer spending increased more than expected in April and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month. A measure of inflation most closely watched by Federal Reserve officials picked up in April, reflecting the difficult path ahead for economic policymakers as they weigh whether to raise interest rates again to bring down stubborn price increases.

  • CONTENT*

0:00 Start
0:15 Introduction
0:30 AI
1:24 Debt Ceiling Issues
3:00 US Markets
3:40 US Retail Sales
4:15 PCE Data Higher
5:00 Rate Hikes Coming?
7:20 Treasuries
7:40 Europe
8:20 UK Retail Sales
9:50 Asia
12:30 Oil
13:45 Gold
16:13 Australia
18:50 RBA To Lift Again
21:20 Crypto
22:05 Summary and Close

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
Another Dose Of “Hope-ium” Kicks Markets Higher! [Podcast]
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Another Dose Of “Hope-ium” Kicks Markets Higher!

US stocks rose broadly in their last trading day before a long weekend, despite painfully slow progress on debt ceiling negotiations and disappointing inflation data. Chip stocks surged for a second straight day on optimism about artificial intelligence.

Investors were closely watching debt ceiling talks as Biden and McCarthy still seemed at odds over several issues heading into the long weekend, with the U.S. stock market closed on Monday for the Memorial Day holiday. but strategists warned there was still a prospect of a sell-off if debt ceiling negotiations break down. Any agreement would have to pass the Republican-controlled House of Representatives and the Democratic-controlled Senate, with the June 1 deadline fast approaching.

The S&P 500 climbed 1.30% to end at 4,205.45 points. The Nasdaq gained 2.19% at 12,975.69 points, while Dow Jones Industrial Average rose 1.00% to 33,093.34 points. This means the Dow Jones Industrial Average ended a five-day losing streak, while the Nasdaq Composite Index and S&P 500 closed at their highest levels since August 2022, with the S&P 500 above 4,200 points. And for the week, the S&P 500 rose 0.3%, the Dow fell 1.0% and the Nasdaq jumped 2.5%.

But Data showed U.S. consumer spending increased more than expected in April and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month. A measure of inflation most closely watched by Federal Reserve officials picked up in April, reflecting the difficult path ahead for economic policymakers as they weigh whether to raise interest rates again to bring down stubborn price increases.

  • CONTENT*

0:00 Start
0:15 Introduction
0:30 AI
1:24 Debt Ceiling Issues
3:00 US Markets
3:40 US Retail Sales
4:15 PCE Data Higher
5:00 Rate Hikes Coming?
7:20 Treasuries
7:40 Europe
8:20 UK Retail Sales
9:50 Asia
12:30 Oil
13:45 Gold
16:13 Australia
18:50 RBA To Lift Again
21:20 Crypto
22:05 Summary and Close

http://www.martinnorth.com/

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

More Debt Ceiling Handbrake Turns Casts A Volatile Outlook… [Podcast]

Just a couple of days ago, markets bounced on the back of hopes talks on raising the US debt limit were in play, on growing confidence a deal to raise the $31.4 trillion debt limit could be reached in coming days, with the benchmark S&P 500 climbing more than 2%. But as this came to a sudden halt, the optimism that had been building through the week fell away. As a result, U.S. stocks ended lower and the dollar lost ground on Friday as the negotiations to raise the U.S. debt ceiling were put on hold, yet moving closer to the deadline to avoid default. Then reports were made suggesting talks had recommenced.

Initial reports that debt ceiling negotiations had reached an impasse rattled markets even as investors were scrutinizing Federal Reserve Chairman Jerome Powell’s remarks in a panel discussion for clues regarding next month’s interest rate decision. In his remarks, Powell said that uncertainties surrounding the lagging impact of past rate hikes and recent bank credit tightening made it unclear whether more monetary tightening will be necessary.

All this is creating febrile markets, where big players can trade the volatility. But others may be best on the sidelines!

CONTENTS

0:00 Start
0:15 Introduction
1:00 Debt Ceiling Impasse?
2:15 Powell On Inflation, Credit and Rates
6:24 US Markets
11:08 Europe and UK
13:40 Asian Markets
17:15 Gold
18:32 Oil
19:40 Australian Markets
21:20 Crypto
22:54 Summary And Close

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
More Debt Ceiling Handbrake Turns Casts A Volatile Outlook... [Podcast]
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