Digital Finance Analytics (DFA) Blog
"Intelligent Insight"
This is an edited version of a live discussion with Head of Investments at Walk The World Funds and Nucleus Wealth, Damien Klassen as we dive into the current market chaos and explore what is really going on. Is this a replay of the DotCom bubble, or a minor glitch, and where will the markets pivot to next?
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
We are now deep into uncertain territory, as the thesis “this time is different” is being tested by reality, and for now, reality is winning. Investors are running from one side of the boat (hopefully not the titanic), to the other, as a fear of recession iceberg looms for investors still leveraged to the gunnels in AI tech, are hopelessly wrongly positioned for such an event.
I can show you thousands of reports claiming this time is different – plenty suggesting the long inverted bond yield curve had lost its power to predict a recession; plenty arguing extreme share market concentration was no big worry; plenty arguing that the mini bubble in artificial intelligence was nothing like what we saw in the DotCom era. But now, (as expected), all those beliefs are being challenged by a perfect storm of market fears. Even though talk of broad recession still seems far-fetched, with real-time U.S. GDP estimates still tracking growth of 2.5%, fears of a negative pulse through the industrial world from a stuttering Chinese economy have been building for weeks.
A series of ugly data points also inflamed investors’ recession fears. There was the weaker than expected data on job openings and a manufacturing activity gauge that showed US factories are going backwards with data showed U.S. manufacturing activity contracted at the fastest pace in eight months in July. And then US non-farm payroll data showed the US economy added 114,000 jobs in July, compared to expectations for 170,000 jobs, while the unemployment rate rose from 4.1 per cent to 4.3 per cent. Did Hurricane Beryl, which knocked out power in Texas and slammed parts of Louisiana during the payrolls survey week, contributed to the below-expectations payrolls gain? Notably, June’s labour market data was also revised down; downward revisions have now occurred six out of the last seven months. We are close to a possible triggering of the so-called ‘Sahm rule’ that maps the pace of a rising U.S. jobless rate against the onset of recession.
And this to me could be said of the broader markets too, hard to read from here – the likelihood of more declines and rotations from big tech are there, at least until NVidia’s next update, while markets might now have swung too far towards recession fears (remember traders make money from volatility). A very interesting time heading into the next RBA meeting… and a continue to believe markets will slide into September. Perhaps now the FED PUT is in play, again..
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
We are now deep into uncertain territory, as the thesis “this time is different” is being tested by reality, and for now, reality is winning. Investors are running from one side of the boat (hopefully not the titanic), to the other, as a fear of recession iceberg looms for investors still leveraged to the gunnels in AI tech, are hopelessly wrongly positioned for such an event.
I can show you thousands of reports claiming this time is different – plenty suggesting the long inverted bond yield curve had lost its power to predict a recession; plenty arguing extreme share market concentration was no big worry; plenty arguing that the mini bubble in artificial intelligence was nothing like what we saw in the DotCom era. But now, (as expected), all those beliefs are being challenged by a perfect storm of market fears. Even though talk of broad recession still seems far-fetched, with real-time U.S. GDP estimates still tracking growth of 2.5%, fears of a negative pulse through the industrial world from a stuttering Chinese economy have been building for weeks.
A series of ugly data points also inflamed investors’ recession fears. There was the weaker than expected data on job openings and a manufacturing activity gauge that showed US factories are going backwards with data showed U.S. manufacturing activity contracted at the fastest pace in eight months in July. And then US non-farm payroll data showed the US economy added 114,000 jobs in July, compared to expectations for 170,000 jobs, while the unemployment rate rose from 4.1 per cent to 4.3 per cent. Did Hurricane Beryl, which knocked out power in Texas and slammed parts of Louisiana during the payrolls survey week, contributed to the below-expectations payrolls gain? Notably, June’s labour market data was also revised down; downward revisions have now occurred six out of the last seven months. We are close to a possible triggering of the so-called ‘Sahm rule’ that maps the pace of a rising U.S. jobless rate against the onset of recession.
And this to me could be said of the broader markets too, hard to read from here – the likelihood of more declines and rotations from big tech are there, at least until NVidia’s next update, while markets might now have swung too far towards recession fears (remember traders make money from volatility). A very interesting time heading into the next RBA meeting… and a continue to believe markets will slide into September. Perhaps now the FED PUT is in play, again..
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
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/
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/
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.
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.
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/
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/
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/
