Hey folks, I hope you are all enjoying the final days of summer. We certainly are entering into a key moment for US Markets. Check out our update for this week.
Weekly Sound-Bites:
• The Webster’s Dictionary defines Fragile as being easily broken or destroyed and lacking in vigor….this could sum of the economic conditions we’re currently experiencing in the US Markets and hence my theme of the week about Humpty Dumpty…sitting on a wall, one small slip and watch him fall…and all the king horses and kings men could not put Humpty together again….Keep in mind we are in the middle of the month of August where bad things have happened to the US Indexes in the past; From the Iraq invasion, the Asian contagion on currency blowups, the Russian debt crisis, the US Credit downgrade, and the surprise devaluation of the Chinese Yuan in 2016…as it shows, August has been one of the poorest trading months for decades…
• This past week was clearly a wild ride with price action moving towards parity for the week at the end of the day on Friday before giving up just a bit to see all indexes finish in the Red for the week…Kicking off the week we saw the Chinese Yuan move below a key funding rate of 7 to 1 on the USD setting off the worst Monday this year only to be met by a rapid counter move on Tuesday, then to be wiped away on Wednesday with a large moves lower before reversing in the afternoon on the surprise move of 3 Asian Pacific Banks cutting interest rates before attempting a climb back on Friday to see a close just below flatline for the week…wow! what a week! So it seems that the initial devaluation of the Chinese yuan to the lowest level in more than a decade set the tone for a volatile week in financial markets. We also saw the 10-year Treasury yield tumble to another three-year low which continued the money flow into safe haven Treasuries. Gold prices hit another 6 year high over $1,500 per ounce (along with the Japanese Yen)
• Now we’re seeing the current Trade War between the US and China entering into a more dangerous phase and to quote an article in the weekend edition of Barons, each side believes they are winning which, in turn, could cause even more aggressive actions between them in the future…this could also change the paradigm between what we’ve experienced over the past 10 years where we saw low volatility in Equities and higher returns being replaced with just the opposite over the next decade…
• Seeing the collapse of interest rates Globally below zero (now over $15 Trillion) suggests clearly something is broken in the World’s Capital Markets and caution is advised…It seems that the ECB, SNB (Swiss National Bank) and BOJ (Bank of Japan) have created these negative interest rate policies in an attempt to revise Growth and Consumer spending; -yet consumers seem to be going more to cash and increasing savings…these policies appear more to be dumping more liquidity into the markets rather than reviving growth…what seems to be needed is more Fiscal Policies (Politicians are normally terrible at these types of things) to help improve each respective country’s economic environment…
• Now we are seeing very big bets on US Monetary Policy (by the Fed Central Bankers) and any future rate cuts (the markets want 2 more this year) and how low the 10 Year Interest rates will go…some are betting on a zero rate when all of this mess finally concludes while others believe that the lower rates go here in the US the less of an economic impact they will have on US Economic conditions…
Weekly Market Round-Up:
Don’t Be A Rat Brain Trader – Be the Red Striped Zebra !!
Trade Smart !
hpb
