Central Bankers have been at pains to say they are being data dependant in setting monetary policy. But the problem now is markets are chasing every new scrap of news, and then trying to react, ahead of the Central Bankers, creating an uncertainty monster.
So an awful August gives way to an uncertain September, investors hope data this month will confirm that the seemingly relentless rise in interest rates will end soon, meaning respite for both stocks and bonds.
But there are a few snags. This September is chock-full of risk events, including central bank meetings, a G20 summit and make-or-break data, not to mention that it tends to be the worst month of the year for the mighty S&P 500.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
The Problem With Being Data Dependant, Is Being Data Dependant!
Central Bankers have been at pains to say they are being data dependant in setting monetary policy. But the problem now is markets are chasing every new scrap of news, and then trying to react, ahead of the Central Bankers, creating an uncertainty monster.
So an awful August gives way to an uncertain September, investors hope data this month will confirm that the seemingly relentless rise in interest rates will end soon, meaning respite for both stocks and bonds.
But there are a few snags. This September is chock-full of risk events, including central bank meetings, a G20 summit and make-or-break data, not to mention that it tends to be the worst month of the year for the mighty S&P 500.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
…Ain’t no fun and games! This is an edited version of our recent live show, which was a dose of reality from Investment Manager Tony Locantro, from Alto Capital. Is the game up, and what are the consequences for investors, home owners and aspiring first time buyers?
In our weekly market update we look at the latest signals from Jackson Hole, plus market reaction to the tech results, and forward expectations for rates and markets. Meantime in China, expect deposit rates to be cut, while in Australia, market weakness and a weak AUD does not bode well.
We must expect rates higher for longer – so when will the markets adjust?
This week has continued to underscore the change in the market weather, following the hopium of July.
“We’ve long been overdue for a correction in equities, and it’s clear that higher rates have now become the catalyst for that,” said Michael Reynolds, vice president investment strategy at investment and wealth advisory firm Glenmede. “When the opportunity cost for capital becomes more competitive, valuations should correct on risk bearing assets, especially large cap equities which have been trading at significant premiums this year.”
And news that China’s seemingly eternally beleaguered property giant Evergrande has sought bankruptcy protection in New York only added to the strange feeling the financial world has turned upside down. While the problems in the Chinese property sector are far better understood than they were when Evergrande teetered two years ago, China’s post-lockdown economic troubles – perhaps best typified by the nation’s slide into deflation – adds a new and worrying link in what seems increasingly like a negative feedback loop.
As 2023 began, the consensus was clear: China’s economy would surge out of COVID-19 lockdowns, with monetary and fiscal stimulus providing tailwinds, while the US would fall into a brief recession that would likely lead to equity market correction and rate cuts.
But instead, the US economy has proven extraordinarily resilient and equity markets have surged 22 per cent from their October 2022 lows. But in the US, the climb in long-term bond yields to levels not seen in more than a decade is a reminder that economic strength can also weigh on investors.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
This week has continued to underscore the change in the market weather, following the hopium of July.
“We’ve long been overdue for a correction in equities, and it’s clear that higher rates have now become the catalyst for that,” said Michael Reynolds, vice president investment strategy at investment and wealth advisory firm Glenmede. “When the opportunity cost for capital becomes more competitive, valuations should correct on risk bearing assets, especially large cap equities which have been trading at significant premiums this year.”
And news that China’s seemingly eternally beleaguered property giant Evergrande has sought bankruptcy protection in New York only added to the strange feeling the financial world has turned upside down. While the problems in the Chinese property sector are far better understood than they were when Evergrande teetered two years ago, China’s post-lockdown economic troubles – perhaps best typified by the nation’s slide into deflation – adds a new and worrying link in what seems increasingly like a negative feedback loop.
As 2023 began, the consensus was clear: China’s economy would surge out of COVID-19 lockdowns, with monetary and fiscal stimulus providing tailwinds, while the US would fall into a brief recession that would likely lead to equity market correction and rate cuts.
But instead, the US economy has proven extraordinarily resilient and equity markets have surged 22 per cent from their October 2022 lows. But in the US, the climb in long-term bond yields to levels not seen in more than a decade is a reminder that economic strength can also weigh on investors.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Wall Street’s main stock indexes closed sharply lower on Tuesday after stronger-than-expected retail sales data stoked worries interest rates could stay higher for longer, while U.S. big banks dropped on a report that Fitch could downgrade some lenders.
The U.S. retail sales data comes on the heels of strong inflation readings for July, and could potentially give the Fed more impetus to remain hawkish in the coming months. Such a scenario bodes poorly for risk-driven assets, particularly tech stocks.
The Commerce Department report showed retail sales grew 0.7% last month against expectations of a 0.4% rise, suggesting the U.S. economy remains strong.
After the data, traders’ bets of a pause on hikes by the Federal Reserve next month stayed intact at 89%, yet analysts said investors were worried rates could stay at current levels longer than anticipated.
Banks saw the brunt of the selling as investors grew more anxious about interest rates. The U.S. Treasury yield curve has been inverted for over a year, with longer-term bonds yielding less than short-term debt instruments. This persistent situation pressures profits that banks can earn on loans.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Wall Street’s main stock indexes closed sharply lower on Tuesday after stronger-than-expected retail sales data stoked worries interest rates could stay higher for longer, while U.S. big banks dropped on a report that Fitch could downgrade some lenders.
The U.S. retail sales data comes on the heels of strong inflation readings for July, and could potentially give the Fed more impetus to remain hawkish in the coming months. Such a scenario bodes poorly for risk-driven assets, particularly tech stocks.
The Commerce Department report showed retail sales grew 0.7% last month against expectations of a 0.4% rise, suggesting the U.S. economy remains strong.
After the data, traders’ bets of a pause on hikes by the Federal Reserve next month stayed intact at 89%, yet analysts said investors were worried rates could stay at current levels longer than anticipated.
Banks saw the brunt of the selling as investors grew more anxious about interest rates. The U.S. Treasury yield curve has been inverted for over a year, with longer-term bonds yielding less than short-term debt instruments. This persistent situation pressures profits that banks can earn on loans.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
