Yesterday, it took just a few simple words from Fed Chair Janet Yellen to flip the “on” switch for risk-on assets yesterday. “Global developments have increased the risks” to the outlook and “given the risks, I consider it appropriate for the FOMC to proceed cautiously.” This does not come as a surprise to us. We had been forecasting for 2 years now, (aside the obvious December FED policy mistake) that there are currently no macro-economically based reasons for the FED or any major global central banks to feel pressured to raise rates, and we do not see any pressures to do so rising in the 6 – 12 months time horizon.
Category Archives: Currencies
Morning Market Commentary & Weekly Charts
According to the latest sentix investors’ survey, markets are less nervous on Chinese equities from a medium-term strategic perspective in recent weeks, albeit survey readings remain well down on twelve-month highs. This chimes with a wider revival in sentiment towards Emerging Equity Markets as an asset class, as well as a more upbeat view among survey participants on the outlook for Commodities.
Morning Market Commentary
In the US, the Federal Reserve left the target range for the benchmark federal funds rate unchanged at 0.25% to 0.5%, as widely expected, and scaled back its forecasts on the path of interest rates. The Fed, which lifted interest rates for the first time in nearly a decade back in December, said rate rises this year would be more gradual than expected, with two on the cards versus the four projected at the end of last year.
Weekly Market Commentary & Charts
In the US, all eyes will be on this weeks’ FOMC meeting. We are not expecting for the FED to make a change to the current rates. Nevertheless, we see the Federal Reserve is the scariest of all Central Banks. Particularly, as they failed to adequately gauge US macro shifts and reacted with incorrect policy decisions subsequently.
Morning Market Commentary
Investors did fear that further momentary accommodation could weigh a bit on the Euro, however, as we have been writing in the past 6 weeks, most of the Euro’s negative sentiment is backed into the cake, and we see the EUR/US$ to hold the next support level of 1,0680.
Weekly Market Commentary & Charts
The global economy is heading for a storm as faith in policymakers dwindles, according to a stark warning from one of the world’s most respected financial institutions. The uneasy calm in financial markets last year has given way to turbulence, the Bank for International Settlements, known as the central bank for the world’s central banks, said in its latest quarterly report
Morning Market Commentary & Weekly Charts
Over in the US, Q4 GDP was marked up slightly to 1%, but that was mainly because of a bigger stockpiling of inventories that could weigh on the economy in early 2016, and reflects a slowdown in growth that set in during the waning months of 2015. The US grew 2.4% for the second year in a row, failing to reach 3% for the 10th straight year. We see the outlook for 2016 deteriorating further. Economists predict the US will stick to its current rate of growth, held in check by a strong dollar, weak exports and slack business investment. We maintain our 2016 target of 1.6% for the US GDP.
Morning Market Commentary & Weekly Charts
We stand firmly to our point that the December FED rate hike was a policy mistake proven by the increasing volatility and deterioration in asset prices in the world since. Hence why we do not expect the FED to continue in 2016 with further tightening, on the contrary, as we do expect the US economy to show a negative GDP print in either the current quarter, possibly also in Q2, we are anticipating for the FED to resume its QE program later in 2016.
Morning Market Commentary & Weekly Charts
Global credit analysis has been a much better gauge for financial market analysis for the past 4 decades. Although our firm’s balance of experience and expertise is stemming from equity markets and products, we have been applying a more asset class agnostic research mantra, being totally currency and financial asset category agnostic. Over the past 13 years in particular, we have taken more and more lead from the credit side, and it has helped us and our clients to be ahead of the herd, particularly when it comes to global asset allocation recommendations and making clear alpha choices.
Morning Market Commentary & Weekly Charts
The OECD today announced it sees evidence of further slowdown as its gauges of future economic activity, with its composite leading indicator for its 34 members, fell to 99.7 from 99.8 in December and continue to point to slowdowns in the US, the UK and Russia, however recent readings show steady growth in the Eurozone, and an acceleration in India.
Morning Market Commentary & Weekly Charts
Economic focuses this week are on the January ISM report on Monday and the January US and Canadian employment reports on Friday. Technical signs of a bottom and start of an intermediate uptrend in most equity indices, commodities and sectors appeared last week. However, as anticipated, volatility remains high, but declining: another technical sign of improving intermediate prospects.
Morning Market Commentary & Weekly Charts
Globally, we are expecting for mixed economic news this week. In the US (US Consumer confidence, New home sales, Chicago PMI, Michigan Sentiment). Focus is on the FOMC meeting on Tuesday. While near-term sentiment towards global equity indices is running at modestly positive levels, the latest sentix survey suggests investors remain deeply cautious on developed and emerging markets from a medium-term strategic perspective.
Morning Market Commentary & Weekly Charts
When it comes to 2015 and our predictions, we were heavily countered by a lot of investors in the US & the UK with disbelief, as we had been most concerned about an increasing slowdown in GDP economic activities in both China and the US. Even as we speak, this morning the IMF downgraded global GDP expectations for 2016 from 3.6% to now a reduced 3.4%. We have 2.9% as a forecast for 2016, and believe that there will be continued concern by financial market participants throughout the 1H of 2016, whether this number can be met.
Morning Market Commentary & Weekly Charts
Our weekly investment strategy advice for investors is: To wait until the dust settles， following last week’s shock events, which we wee predicting as an immediate consequence to Ms. Yellen’s ill timed, rate rise.
Morning Market Commentary & Weekly Charts
Economic data this week is expected to confirm slowing economic growth in the US. Data will be sufficient to prompt the Fed to increase the Fed Fund rate for the first time in a decade. As indicated earlier, an increase in the Fed Fund rate will set the stage for a significant recovery in North American equity markets over the next three months.
Morning Market Commentary & Weekly Charts
Economic news this week focuses on November Retail Sales. El Nino type weather through this winter is expected to have a positive impact on Industrial Production and the S&P 500 Index (i.e. an extra 3% gain during El Nino winters). The month of December is the strongest month of the year for North American equity indices. However, strength tends to be concentrated during the last two weeks of the month (i.e. Christmas rally period).
Currency Commentary & Charts
US$ tremendously overbought, the US$ index dipped, along with the market, into yesterday’s afternoon trade. The US$ Index sits around 100, a key psychological level that has already shown some weight in restraining upside activity earlier in the year.
Morning Market Commentary & Weekly Charts
International events will dominate all asset classes, as terrorism in several parts of the world remains a focus. Economic news this week is expected to be slightly positive relative to previous reports. US Thanksgiving holiday is on Thursday. US markets are open on Friday, but trading will be exceptionally thin.
Morning Market Commentary & Weekly Charts
For the past 10 months, the global economy has fared increasingly disappointing. And, we continue to see no encouraging signs for the coming 6 – 9 months for any of the major economies, be it in Asia, Europe or the Americas. Additionally, the most tragic events over the weekend in Paris, and the to be anticipated responses by French and European and allies’ intelligence forces are going to put additional stress into families, societies and consumers. We are anticipating significant government retaliatory and future pre-empting measures, which collectively are surely not going to affect the psychologies of European and foreign consumers and tourists and travelers in a positive way.
Morning Market Commentary
Today, the Organization for Economic Cooperation and Development lowered it’s global GDP forecast in its semi-annual forecasting to hit 2% this year, 2.2% next and 2.3% in 2017, and part of the organization’s report said that growth in the US would continue to be among the most robust in the group of nations, hitting 2.4% in 2017. It predicted the 19-nation Eurozone would continue to lag behind the US, with growth at 1.5% this year, 1.8% next year and 1.9% in 2017. Lower oil prices and falling unemployment will bolster economic growth in the 34-nation group of developed economies, helping to offset the impact of a slowdown in emerging economies.
Morning Market Commentary & Weekly Charts
The easy money in equity markets and economic sensitive sectors has been made already for the current intermediate up cycle. Q3 reports will have an influence on equity markets again this week. Earnings released to date have been mixed. Beyond the earnings report season, seasonal influences are positive for most equity markets and primary sectors. We advise investors to accumulate seasonally attractive equities and economic sensitive sectors on weakness. Economic data this week focuses on the October employment report on Friday. Consensus is that the report will improve significantly from the exceptionally disappointing in September. Other economic data is expected to be mixed. PMI reports from China and Europe are expected to show a slight improvement over previous reports.
Morning Market Commentary & Weekly Charts
Economic data this week focuses on the FOMC meeting on Wednesday. Consensus is that the FOMC wants to increase the Fed Fund rate to reflect improving economic conditions, but wants more evidence of sustainable growth. We remain convince that there is not enough US intrinsic macro strength, besides global macro weakening, for the FED to raise rates in 2015, and very likely the same for 2016
Morning Market Commentary & Weekly Charts
International news is expected to be relatively quiet this week. Economic data focus in the US this week is on the housing industry.The easy money in equity markets and economic sensitive sectors has been made already for the current intermediate up cycle. Beyond the earnings report season, seasonal influences for equities turn positive. Short and intermediate technical indicators are overbought, but have yet to show signs of rolling over. Preferred strategy is to accumulate seasonally attractive equities and economic sensitive sectors on weakness between now and the end of the month.
Morning Market Commentary
The reality is that growth has been slowing all year, and that’s a fact. Global trade is still decelerating, in spite of massive and accelerating currency devaluation schemes by most G-10 members. Now, with increasing and sufficient macro economic evidence of US GDP slowing, the FED is caught in a quagmire, which we have been predicting steadfast since March 2013.
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2015 Q4 Global Investment Strategy
Stocks have the seasonal tendency to outperform bonds from mid-November until the end of March, a trend that we see to continue in 2015. As in prior reports, we do think that the current stagnation-type economic environment, impacting two-thirds of the global economy, namely the US and Europe, and Japan, is going to provoke most long-term investors to conduct a major switch from “negative-return based” bond investments into high-yield equities with stable and defensive cash flow generative outlook.
Morning Market Commentary & Weekly Charts
Bond proxies like utilities and REITS gained ground, while banks and insurers sold off sharply. It was a bad week for risk assets leading to the bigger question of whether the August prices plunge was a normal correction or something more serious. A bounce off that low was expected, but has now run its course. We are still expecting for markets to retest the summer lows between September and October.
Morning Market Commentary & Charts
A reversal the US$ would be conducive to strength in US earnings, as well as an improvement in commodity prices, which is a significant factor in the declining inflation statistics. Seasonally, the US$ remains in the weakest period of the year, running through to the end of October and continuing in the month of December.
Morning Market Commentary & Weekly Charts
Risks related to international events remain quiet with most focus on China. Volatility in Chinese equity markets remains extreme. Economic news this week (other than the FOMC news on Thursday) is expected to be mixed. FOMC news on Thursday is by far the most important equity market-moving event this week. Polls say that chances of an increase in the Fed Fund rate are 25%. Knee jerk reaction to an increase likely will be negative. However, weakness will provide a buying opportunity.
Morning Market Commentary & Weekly Charts
We continue to advise investors to reduce weightings towards US equities and add aggressively towards equities markets such as Europe, (Germany, France, Netherlands; Spain) and Asia, (Japan, China, India, Vietnam, Indonesia; Philippines) and Latin America (Brazil, Mexico).
Morning Market Commentary & Weekly Charts
Economic news this week is expected to show accelerating US economic growth in Q3, a scenario that likely will raise concerns about timing of the first increase in the Fed Fund rate. International events also could influence equity markets this week Hot spots include China, Russia, Venezuela and selected Middle East countries.
Morning Market Commentary & Weekly Charts
Global equity markets entered into a meltdown phase on Friday, and are undergoing a usual “Sell in May & Go away”-type summer correction, or as we had correctly predicted for 2015 “Sell before May & Go away”. International events could influence equity markets again this week. In Europe and the US, economic news is expected to show a mixed-to-stable economic growth momentum in Q3, a scenario that likely will continue to occupy investors about timing of the first increase in the Fed Fund rate. Seasonal influences for North American and European equity markets
are negative between now and the second week in October. Historically, the
month of September is the weakest month of the year for equity markets.
Short and intermediate technical indicators are trending down and most are oversold.
However, signs of a bottom have yet to appear.
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Morning Market Commentary 2015 Global Equity Indices in danger of breaking
Global equity markets are in danger of breaking below major support levels, Global Bonds still outperforming.
Morning Market Commentary & Weekly Charts
Chinese inflation grew +1.6% y-o-y in July, up from +1.4% the previous month and
ahead of estimates of +1.5%. Talks between Greece and its international creditors are progressing and hopes are that a third bailout deal could be agreed by 20th August. The outlook for Ireland has been amended to positive from stable by the credit ratings agency Fitch. In the US, data from the Labor Department showed employers added 215,000 jobs in July, missing the consensus forecast of 225,000. Lastly, the global economies are getting relief from Oil prices declining to new lows.
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Morning Market Commentary
For the month of August, we are expecting for a historical repeat for bond prices around the world to have their best month of the year. So far, for the past week, investors have been evaluating the deteriorating macro news, and re-allocated new money into the bond markets, just as we were predicting. Strength in the bond market, utilities and real estate over the past week signaled that investors are coming around to our views that the Federal Reserve is likely to postpone its first increase in the Fed Fund rate beyond September, which in return, will be a positive influence for equity markets.
Morning Market Commentary & Weekly Charts
As we had highlighted in several publications since March 2015, Global GDP Growth is set to slow across a growing number of the world’s largest economies, including the US and China. China’s worries have spread to oil, which is adding to last week’s -5% drop. Global economic growth slowed during June, led by a significant contraction in emerging market output. The global economy is struggling with secular stagnation. Too much fiscal and monetary intervention by governments an their central banks and now with even more of these policies, things will get increasingly worse, not better. For now, we are expecting for Europe to temporarily slow over the next 2 months again, before gaining macro momentum in late September until the end of the year.
Morning Market Commentary
US inflation continues to run below the Fed’s 2% target, which policymakers view as a “temporary result of the strong US$ pressuring commodity prices”. However, maybe the FED should rethink their definition of “temporary” for the US$ strength, and the inherent tremendously negative impacts on the US economy, the negative impacts on competitiveness of US companies, and negative impact on imports, exports, negative impacts on US inflation, or better, the lack thereof. We just cannot see the rational for the FED to raise interest rates, when macroeconomic momentum, and the negative impacts of a strong US$ are already at unsustainable levels, nevertheless with risks of a rate hike going to exacerbate and make things much worse.
Morning Market Commentary
US inflation continues to fade, well below the Fed’s 2% target, which policymakers view as a “temporary result of the strong US$ pressuring commodity prices”. However, when looking at the recent US$ charts, maybe the FED should rethink their definition of “temporary” for the US$ strength, and impacts on the US economy and inflation, or better, the lack thereof.
Morning Market Commentary & Weekly Charts
We are seeing increased technical evidence that world equity markets and most sectors remain in a corrective phase since mid-May. Short and intermediate technical indicators for most equity markets and sectors are oversold but continue to trend down. The latest survey of investors’ sentiment conducted by sentix has revealed that investors’ feel relief after the turn in the Greek debt drama. From an already high level, sentix Sentiment rises once more by over 10 percentage points and signals a party mood. In contrast, commodities command investors’ respect. Here, fears that the whole sector is in a free fall dominate. Meanwhile, the US$ benefits.
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Morning Market Commentary & Weekly Charts
The EU and Greece have secured debt restructuring and medium-term financing. We are not expecting for “Greece’s no vote” to have a substantial impact for equities, either for bonds or foreign exchange. For both equities and bonds, early signs of a peak in summer volatility have appeared. Now is the time to prepare for seasonal buying opportunities. However, we are seeing increased technical evidence that world equity markets and most sectors remain in a corrective phase since mid-May. Short and intermediate technical indicators for most equity markets and sectors are oversold but continue to trend down.
Morning Market Commentary & Weekly Charts
Valuations for European equities are even more very favorable since the usual sell-off in May began, both on an absolute and on a relative basis. We are expecting for the ECB to make a decision whether to continue providing emergency liquidity assistance (ELA) to Greece at a meeting today. Consequent to the continued geo-political uncertainty in Europe regarding Greece and implications on the rest of the Eurozone, and the US, we do continue to expect for the US Federal Reserve not to raise the Fed Funds rate in 2015.
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2015 Q3 Global Investment Strategy & Equities Outlook
10-Year US and European Bond yields will turn lower one more time. The US$ will decline further. Oil & Commodities will move higher. Global Equities will correct,
but then recover sharply towards end of Q3 into Q4. EAFE to continue to outperform US equities.
Stocks have the seasonal tendency to outperform bonds from mid-November until the end of March, a trend that we see to continue in 2015. As in prior reports, we do think that the current stagnation-type economic environment, impacting two-thirds of the global economy, namely the US and Europe, and Japan, is going to provoke most long-term investors to conduct a major switch from “negative-return based” bond investments into high-yield equities with stable and defensive cash flow generative outlook.
Morning Market Commentary & Weekly Charts
European 10-Year government bonds are entering their period of seasonal strength from mid-May until end of August. After the short-term current correction in US, European and Japanese 10-Y
treasuries, which we expect to last for another few days, we are expecting for further yield compression between French, Italian, Portuguese, Spanish 10-Y Government bonds and the German bunds to materialize over the coming 2 – 3 months, and are advising for investors to increase their weightings into Spanish, Italian, Portuguese, Irish 10-Year bonds into the current correction.
Morning Market Commentary
The Eurogroup meeting here in Luxembourg today has been touted as the “last chance” for Greece to agree a deal in time of the end of June. Athens must repay EUR 1.6BN due to the IMF by 30th June but has admitted that it has insufficient funds to do and that compromising to unlock frozen aid would be a necessity. We would not be surprised that there would be a positive outcome for the Greek Saga today in Luxemburg, which then consequently would cause both European equities and the Euro to snap back considerably.
Morning Market Commentary & Weekly Charts
Economic focus this week in the US is on the FOMC meeting results to be released on Wednesday. Earnings and sales by S&P 500 companies during the next two quarters remain a concern. Intermediate and technical indicators for most equity markets and sectors remain overbought and trending down. Short-term technical indicators (mainly momentum indicators) for most equity markets and sectors are trending up.
CGI Morning Note
Seasonally, European equity benchmarks follow the same trends as the North American market, however, the moves tend to be greater on both the upside and the downside; European indices tend to outperform the S&P 500 Index from October to May and underperform during the current period of weakness.
CGI Morning Note
We believe that the past 5 days sell off in US and European 10-year Treasuries is overdone, and that current market prices constitute a clear “buy” signal. We are advising for investors to step up investments into 10-year US and European bonds, which sold off excessively in the past week, on nothing but a bit of improving, but still mixed, and not sustainable macro data from Europe and the US in the past three days.
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CGI Morning Note & Weekly Charts
“The Federal Reserve should defer raising interest rates until there are greater signs of wage or price inflation than are currently evident”, the International Monetary Fund said today. The IMF now took the GDP growth outlook for the US down to 2.5%. This is still way above our 2015 forecast for the US of 2.2% GDP growth, which we are likely going to revise down in the coming months, if growth does not kick in massively in the current quarter, which we do not see in most of the aggregate data, which
we use in our assumptions.
IMF Says China’s Currency No Longer Undervalued
We noted in a previous report that the steeper the ascent, the deeper the correction. The Shanghai composite index has hit CGI’s target of 4,900 and is vulnerable to around 4,400 or even 4,100 should selling volume sustain itself after yesterday’s decline on record volume. Those with a short-term trading orientation may consider trimming positions or taking profits. However, we believe that the ‘A’ shares can still push higher after a period of consolidation. We reiterate that we believe the greater risk for long-term investors is one of not participating and missing out on China’s continued bull run.
Morning Market Commentary & Weekly Charts
Seasonally, rates typically decline during the summer months as investors “de-risk” from equity markets, however, the potential for the Fed to raise rates sometime this year has the market fleeing this asset class, putting some temporary uncertainty into the success of this seasonal phenomena.
See The Chinese Forest Through The Trees
Although domestic loan demand has been trending below expectations, further reductions in the RRR in conjunction with new monetary and fiscal policy initiatives could lead to resurgent economic activity. We believe that China has at least two more years to pursue aggressive stimulative monetary policy given the current state of the global economy and generally accommodative monetary policy enacted by most central banks. In our view, it will be at least that long before accommodative global monetary policy transitions to a tightening cycle. Meanwhile, the world is awash in rising central bank driven liquidity.
Don’t Buy The Avoid China Argument—Buy The Shares Instead
It’s no surprise that many commentators perpetually warn off potential investors in China shares. Those warnings have become even more strident after the 104% run up in the Shanghai Exchange over the past twelve months. Beijing is managing the impact of economic reform by selectively implementing additional monetary stimulus.
Morning Market Commentary & Weekly Charts
Total global debt is up 40% since 2007 to US$ 199 TRN according to a study by Mc Kinsey. As a percentage of GDP, debt is now higher in most nations than it was before the crisis of 2008/2009. On average globally, it is 286% now vs. 269% in 2007. Despite the economic rebound since 2009, the debt of households, corporations and especially governments continues to rise. Governments in advanced economies have borrowed heavily to fund bailouts in the crisis and offset demand in the recession. The danger is far larger and more imminent than commonly admitted, as evidenced in the chart below.
Morning Markets Commentary & Charts
US equities, even at current extremely high valuations, still have DDM support. The present dividend yield of the S&P 500 sits around 1.95%, almost double what it was at the start of the century. For the first time since the 1950’s, the dividend yield of the S&P 500 benchmark is higher than the 10-year Treasury yield (1.92%), increasing the appeal of the equity market. Whatever the use of enormous corporate cash balances, there remain many reasons to be enticed by the equity market over the long-term. Defensive sectors like utilities (+25%) and healthcare (+24%) are leading the US sector higher last year, and we believe that the low growth environment keeping the FED monetary policies on hold will bode well again for these sectors in 2015.
Morning Market Commentary & Weekly Charts
European, US and Japanese equity markets period of seasonal strength is starting now. Hence, why we recommend reducing equity weightings in those markets, and advising investors to wait for better prices for re-allocating money in late summer.
Morning Market Commentary & Weekly Charts
We are still not assuming that the Fed will raise the FED Fund rate this year, so, consequently we see US equity markets may trade down within the “normal historic period of seasonal weakness” from May to September, which has been between -8% and -10%, before then a later FED move on raising rates may circumstantiate a more pronounced correction for equities in the US, and globally, to the tune of a -10% to -15% correction.
Morning Markets Commentary & Charts
As mentioned in previous’ reports, April and May typically see a topping process for the US$ leading into the period of weakness from June through October.
Morning Market Commentary & Weekly Charts
International events could have an impact on equity markets this week. The Greek government is close to running out of international currency to pay its debts. Negotiations continue. Discussions about framework of the Iran nuclear agreement continue. Venezuela is close to government breakdown. Terrorist hot spots seem to surface on a regular basis. Economic news this week is expected to show a slight recovery in the US economy in March from the weather related slowdown in February. Focus is on March Housing Starts to be released on Thursday.
Morning Market Commentary
Stocks around the world ended with marginal gains on Wednesday as investors digested the minutes from the latest FOMC meeting and awaited earnings from Alcoa after the closing bell. The S&P 500 Index continues to hover around its 20 and 50-day moving averages as investors refrain from any significant directional bets given the reporting season ahead. In the midst of this near-term hesitation in the US, global equity markets are excelling, outpacing the returns of American benchmarks.
Morning Market Commentary & Weekly Charts
Seasonal influences turn strongly positive (possibly due to anticipation of good news released by CEOs at annual meetings when they release “difficult” first quarter results e.g. stock splits, share
buy backs, dividend increases). We are advising investors to accumulate seasonally attractive economically sensitive North American and internationals equities, with the exception of Japan
(due to March 31st being end of fiscal year, and a consequent -8% – 10% historical sell-off affecting Japanese equities from April – July) on weakness this week for a seasonal trade lasting until at least May.
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2015 Q2 Global Investment Strategy
Equities globally still offer the best risk-adjusted returns compared to most other asset classes. Overall, for the broader equity markets to go higher, we need to see a rotation into the more cyclical sectors and into the financials. We prefer sectors like Energy, Industrials, Materials, Financials, Utilities and particularly public infrastructure themes for Europe, the US and Japan, where valuation measures look less demanding, with increasing cash flows, and high yields and growing dividends like particularly in Automotive, Energy Industrials and Basic Materials. Chinese, Indian, Brazilian and Russian equities have entered their period of seasonal strength, and hence why recommend to stay overweight the Shanghai Composite, and increase weightings into Indian, Brazilian and Russian equities for Q2 2015. European equities remain cheapest on an absolute basis and and the relative valuation discount to bonds has improved over the past months, particularly since the ECB started QE. The much weaker Euro in combination with with much lower commodity prices for champion European industrial manufacturing and luxury manufacturers companies will help exports and increase earnings in 2015 beyond consensus estimates. European equities with much higher dividend yields than anywhere still offer much better risk-adjusted total returns. We see increasing M&A activities to be a big theme in Europe and help drive equity prices higher. However, Q2 in Europe, like in Japan and the US represents the period of seasonal weakness, and will offer better buying opportunities ahead.
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Strategy Update: China
China forecasts and estimates are likely to become very sloppy as government guidance begins to lose its quality of certainty that many forecasters have relied upon. The most important question has always been whether Premier Li Keqiang can implement the necessary reforms to ensure that the economy will grow in a long term sustainable manner. Foreign investors continue to flee from China. The media negatively impacts foreign investor sentiment by drawing negative conclusions as it highlights the slowest economic growth in more than two decades juxtaposed to the double digit growth of an earlier era; for them the glass is always half empty.
Morning Market Commentary & Weekly Charts
International events will influence financial markets including the election in Israel and evolution of events in Greece. Economic news globally this week is expected to show a mild improvement relative to comparable reports released at the same time in February. US economic focus this week is on the FOMC meeting and news conference on Wednesday. In the US, stocks drifted lower on Friday as investors jockey for position ahead of this week’s FOMC meeting. FOMC meetings where a quarterly press conference has followed are thought to be the most probable time for the Fed to announce its first rate increase; the next opportunity won’t be until June 17, therefore it is no wonder that investors have been reacting in the equity, currency, and treasury markets much more
significantly than past meetings.
Morning Market Commentary
The parabolic rise of the US$ is finally becoming a discussion topic amongst the global strategists, asset allocators and analysts, so that now we start seeing US government officials coming out of the woodworks and starting to comment on the exuberant strength of the US$ hurting US industries and the inherent lack of competitiveness.
Morning Market Commentary
US 30-year treasuries peaked at the end of January following test of trend line resistance; since the price of the 30-year treasury bond has traded lower by around 7%, now testing the middle line of the long-term rising trend channel. We are assuming the price trades to the lower limit of the rising range, a decline of around 13% (to $130) from present levels is still implied.
Morning Market Commentary & Weekly Charts
We are not fearful of a Fed rate hike, as that is typically good for stocks given that it means the economy is in good shape and stocks stay on the uptick for 2-3 years after. Plus, worldwide government bond competition will lead more investors to US Treasuries to keep a lid on rates and thus continue to make stocks look attractive by comparison. Our views for 2015 (as for 2014) of the global investment world differ substantially from consensus, and applied by other investors on Friday. Yet when level heads prevail, however, it may take the market 3 – 4 months, as it has
in the past years, we think that more people will come around to our investment views and conclusions. As such, we believe that this is a buyable dip for US 10-Year government bonds with higher highs on the way for 2015. For now, US bonds are still more attractive to investors than US stocks.
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Morning Market Commentary & Weekly Charts
We continue to advise investors to increase allocations towards Japanese equities and towards the $NIKK in particular, as we see the structural changes made by Abe’s government gaining traction and delivering tangible results, and Japanese investors increasing exposure into domestic equities. Historically, the N-225 is in a period of seasonal strength from January until early April (in part due to fiscal year end {March 31st} window dressing related performance).
As we had been expecting, European benchmarks have been outperforming US benchmarks since the beginning of the year, mainly due to the much lower valuations attracting investors (P/E; P/CF; much higher dividend yields) but also benefiting from the accommodative monetary policies enacted by the ECB. We see increasingly technical evidence of the strength in European equity markets set to continue, following historic seasonal strength patterns that run through to the start of May, which is coinciding with the end of annual dividend pay-out period.
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Morning Market Commentary & Weekly Charts
Equities globally rallied on today, boosted by news that Greece has reached a deal to secure a loan extension with its creditors. The German DAX 30 and the Dow Jones Industrial Average charted a new all-time closing high, following the S&P 500 Index and Russell 2000 Index, which charted all-time highs earlier in the week.
Morning Market Commentary
Seasonally, treasuries trade lower between now and the end of April as investors take on more risk in the equity market; the month of March is by far the weakest period of the year for the treasury bond, declining by an average of 1.6%. The 30- Year Treasury Bond has declined in March 87% of the time over the past 24 years, a significant frequency for any asset class. Bonds seasonally come back into favor during the summer months when investors tend to be more risk averse.
Morning Market Commentary & Weekly Charts
Treasury bond prices are vulnerable to further technically corrective declines, particularly given that we are in the midst of the period of seasonal weakness for the asset class; negative seasonal tendencies persist through April. However, over the past 30 years, each time the long-term treasury bond has met up with this rising level of resistance, stocks have generally performed well in the months and years that have followed. However, we continue to advise investors to trade bonds according to their long-term trend channel dynamics. We see nothing fundamentally having changed over the past 2 months for that trend to change.
Morning Market Commentary
Despite the bearish oil report, and the significant headwind imposed by the stronger US$, the price of $WTIC closed firmly higher, breaking resistance charted around the 50-day moving average. Momentum indicators are starting to curl high after briefly rolling over in the month of February. A break above the February high around $54 would confirm a higher short-term low charted in recent days, providing a strong first step towards a series of higher-highs and higher-lows.
Morning Market Commentary
Early technical signs have surfaced that 10-Y US Treasuries are rolling over from overbought levels. However, as we noted repeatedly over the past 10 months, due to falling global
inflation, we see any temporary small correction of 10-Y Treasuries as another reentry point for investors, as we anticipate for the yield for the 10-Y Treasuries to fall at least towards 1.3% in the coming 2 quarters.
Morning Market Commentary & Weekly Charts
Stocks are trading at extremely high valuations against a backdrop of slowing economic growth and rising global financial and geopolitical instability. Market cap to GDP ratio is currently at twice its historical average. The Shiller Cyclically Adjusted P/E Ratio (CAPE) is at 1.7x its historical average. The forward P/E ratio of the S&P 500 is currently 16x versus an historical average of 14x .
Morning Market Commentary & Weekly Charts
We believe that the US$ impact is not at all factored in by sell side analysts, and will make for a nasty surprise in the coming quarters in 2015. The price of the long-term bond continues to bump against trend line resistance that has spanned the last 30-years. Should this trend line hold, the long-term treasury bond may succumb to selling pressures following the Fed announcement. International market ETFs including Emerging Markets and European equity market led world equity markets on the upside last week, and we are expecting for that trend to continue over the coming months.
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Morning Market Commentary & Charts
Asian and European financial markets, (currencies, equities and government bonds) were little changed as investors braced for the possibility of new quantitative easing measures from the European Central Bank (ECB). There’s a strong chance that tomorrow’s ECB announcement will boost Eurozone stocks, however not necessarily weaken the Euro further, as the parabolic rise of the $USD relative to most world currencies since June 2014 has been overdone in time and magnitude. The ECB move, in combination with the European-wide Juncker Plan, which will
bring an additional stimulus to particularly infrastructure projects in Europe, should be convincing investors to make further equities and bond investments into the Eurozone.
Morning Market Commentary & Weekly Charts
North American equity markets entered into a short-term corrective phase on December 29th. The corrective phase is expected to continue until end of the fourth quarter earnings report period (i.e. late January/early February). Thereafter, North American equity markets are expected to resume an intermediate uptrend as they normally do during a US Presidential Pre-election
year. We are expecting for equity markets around the world to be exceptionally volatile this week due to a series of economic/political news events.
Morning Market Commentary
In a shock move this morning, the Swiss central bank scrapped its minimum exchange rate of 1.20 Swiss francs a Euro, which was introduced four years ago
to protect Switzerland from the Eurozone debt crisis. The Eurozone’s trade surplus widened in November as exports rose, indicating that a weakening Euro is starting to provide a boost to the economy. The European Union’s statistics agency today announced the Eurozone recorded a surplus in its trade in goods with the rest of the world of EUR20 bn ($23.6 bn), up from EUR16.5 bn in the same month of 2013.
Morning Market Commentary & Weekly Charts
US Equities are extremely expensive compared to its global peers, and have been overweighed & overheld for a very long time by foreign investors. The fact that foreign ownership of US stocks is at an all-time high, totaling 16% in 2014, the highest in 69 years since such records have been kept, is of additional concern. For 2015, we are advising US investors to increase their foreign holdings, and reduce US equities exposure.
Morning Market Commentary & Weekly Charts: 2014 Final Words
The yield on the benchmark 10-year Treasury bond ended the year at 2.17%, exactly at our 2014 target price, and down substantially from where it started the year at 3.03%. Despite the fact that the Fed ended its quantitative easing program in October 2014, we do see the long end of the Treasury curve likely to move lower in 2015 on the back of weak global growth, and the fact that “the Fed is boxed in” consequently, and eventually will become more accommodative one more time.
062314 – CGI Morning Market Commentary and Weekly Charts
062314 CGI Morning Market Commentary & Weekly Charts
Carlo Besenius provides his weekly strategy outlook and technical review of markets, commodities, and currencies.
062014 CGI Morning Market Commentary – Gold
Global Strategist Carlo Besenius reiterates his positive stance on gold, both the commodity and mining stocks. Since early June, Gold is up 6%, and Gold Mining Stocks are up 16%. Next resistance for Gold is at 1331.40. CGI’s outlook for potential policy actions in Abe’s 3rd arrow are also included.
060914 – CGI Morning Market Views: Buy 10Y EuroBonds, Sell $, Sell US Equities
Carlo Besenius analyzes the European Bond markets and sees further support for periphery bonds in the coming months. Equity markets have become parabolic, with downside risks increasing greatly.
060514 – CGI Morning Market Commentary: USD/EUR, Euro rates
Global Strategist Carlo Besenius looks at the Euro/$USD rate in light of the recent moves by the ECB to lower rates, and the dynamics of the US trade deficit. We keep our year end forecast of $1.42. Equity indices are entering their period of seasonal weakness.
052214 – CGI Seasonality Analysis
We review the seasonality factors impacting global debt and equity markets over the summer. Equities are expected to see a period of weakness, with good probability for an increase in volatility mid summer.
050114 – CGI Morning Market Commentary: Euro and USD, Commodities
050114 CGI Morning Market Commentary EURO & $USD, Commodities
Global Strategist Carlo Besenius sees the Euro continuing to strengthen over the coming months, with concomitant pressure on the USD. The Euro is 56% of the $USD index. Commodities prices will benefit from this move.
041114- CGI Morning Market Commentary: Greek Bonds, STOXX, CRB, $USD
Yesterday’s Greek Bond auction was a far cry from the turmoil facing the country less than two years ago. CGI recommended purchasing European periphery debt in the fall of 2012, and contested the notion that the EU was at risk of failure. We continue to see European equity markets as fertile territory for institutional investors.
The $USD Index continues to weaken. A fall below $79 sees risk to $73.
The CRB continues to strengthen.
041114 CGI Morning Market Commentary – Greek Bonds, STOXX, CRB, $USD
Morning Market Commentary & Weekly Charts – EAFE cont. to outperform US equities, Oil, Commodities,
Short and intermediate technical indicators for most equity markets and sectors remain overbought. Look for a renewed seasonal buying opportunity in economic sensitive sectors on weakness in the month of January. We continue to recommend to add towards sectors which continue to show seasonal strength such as… Continue reading
Morning Market Commentary – European Stocks to continue to outperform
European stocks gained after global regulators eased the leverage-ratio rule for banks. The Basel Committee on Banking Supervision diluted a planned debt limit for banks following a meeting in Switzerland yesterday. The committee said the leverage ratio, which penalizes low-risk financial activities and curtails lending, was adjusted after thoroughly analyzing bank data. Banking stocks posted the second-biggest gain on the Stoxx 600 after the news. Deutsche Bank and Barclays were among the big risers. We like the EURO STOXX BANKS Index at current levels, and are advising our clients to add towards European Banking stocks. Continue reading
Morning Market Commentary – $hanghai Index ready for a major breakout, Metals, Silver, WTI, NatGas
China became the world’s biggest trader in goods for the first time last year, overtaking the US for all of 2013 and finishing the year with record trade figures in December. Trade with the rest of Asia and increasing flows with the Middle East represent a shift in power away from the US, still the world’s largest economy.
Chinese imports of crude oil grew by the least in almost a decade in 2013, new government data show, posing a challenge to exporters from the Middle East to Africa who are competing to sell more oil into the world’s second-largest economy.
We are advising clients to allocate new funds towards Chinese equities. As the chart shows, there has been a tug of war between the bulls & bears for over 6 months now, and we believe the $SSEC is ready for a major breakout to the upside in the short term. Our 2014 price target for the $SSEC is 3,000. Continue reading
Morning Market Commentary & Weekly Stocks – Global Stocks enter positive seasonal period, German Stocks to outperform
German Equities are at an all-time high. The DAX 30 Index is +20% ytd, after +29% in 2012. Our CGI Global 50 includes 12 German stocks, of which all are in positive territory for 2013.
We think so, particularly when looking at the anemic bond yields that European, US and Japanese government and corporate bonds are offering. We are seeing but one way for German investors, namely to increase equities investments, albeit late, however not too late to the plate, and invest now in their own equity market. Continue reading
Morning Market Commentary & Weekly Charts – Energy, Gold, Precious Metals to improve
Our recommended investment strategy is to maintain a healthy cash position for possible entry into the favorable seasonal trade in October. Seasonally, equity markets hold up rather well during the first half of September, posting gains of 1.3% on average over the last 20 years. The weakest three weeks of the year occurs during the last two weeks of September and the first week of October. Declines over this three-week period reach 2.5%, on average, based on the same 20-year time-span. Contradicting this calendar tendency is the “Sell Rosh Hashanah and Buy Yom Kippur” tendency, which runs through to this Friday. Loss for the S&P 500 between these key dates on the Jewish calendar averages 1.25%. Whichever scenario plays out, caution is warranted as seasonal volatility fuels erratic returns over the weeks ahead.
Morning Market Commentary – Currency & trade balance observations
As previously stated, we had expected the deficit to climb back to US$ 40 Bn after an unusually sharp decline in the prior month. The trade gap sank more than 20% in June to the lowest level since the fall of 2009. Although the increase in imports suggests strengthening demand in the US, a larger trade gap usually means slower economic growth at home since America is buying more goods and services from other countries. Continue reading
Morning Market Commentary & Weekly Charts
Looking forward to the next couple of months, equity markets are entering the weakest period of the year. Over the last 20 years, the S&P 500 index has averaged a loss of 0.20% for the month of September; positive results were realized in only 11 of the past 20 periods. The weak return in September ties it for the third weakest month of the year, behind February and August. The month that September ties with is June as investor reallocate portfolios at the end of the second quarter, just ahead of earnings season at the start of July. A similar reason is culprit for lackluster returns in September as the third quarter concludes. The weakest stretch of the entire year is a three week period that spans the last two weeks of September and the first week of October as investors buy and sell positions ahead of the volatile and uncertain third quarter reporting season. Continue reading
Morning Market Commentary & Weekly Charts – Summer breeze to continue for global equities?
Equity markets have just completed a traditional period of strength from the last week in June to the third week in July. Since the low on June 24th, gains have been extraordinary. The S&P 500 Index gained 8.44%, the Dow Jones Industrial Average improved 6.82% and the TSX Composite Index advanced 5.76%. It’s time to take trading profits in equity index based investments. Sectors with traditional positive seasonality are the exceptions. Gold, gold equities, biotech and utilities are bucking the trend by moving higher as well as outperforming equity indices.
Morning Market Commentary – Gold to move higher
We have been advising clients since June 2nd to sell equities globally prior to the peak period of seasonal weakness ahead in September and October, and continue to do so. Seasonal tendencies once again turn positive for broad market indices at the end of October.
Morning Market Commentary & Weekly Charts – “Tough labor” Day ahead for investors
US equity markets reached an intermediate peak on August 2nd. Short-term momentum indicators for equity markets may rebound early this week from deeply oversold levels, but seasonal trends are expected to re-assert themselves in September. We advise our clients to maintain high cash positions for possible entry into favorable seasonal trades into increasing downside volatility between now and October. We advise our clients to continue to hold/accumulate precious metal and precious metal equity ETFs. They continue to move contrary to equity market trends.
Morning Market Commentary & Weekly Charts – What’s next for the remainder of the Summer?
US equities to continue to underperform, Asia, Emerging markets & European equity indices to outperform, Gold & Metals & mining to outperform, US$ to weaken & correct further.
Morning Market Commentary – Baltic Dry Index Observations
US equities to continue to correct downwards, MSCI World, Asian & European Equities to outperform, Gold & Precious Metals to continue to improve & outperform, Global Government Bond Yields to continue to rise.
Morning Market Commentary & Weekly Charts – Summer Doldrums for global equities
Emerging Equities & Europe to outperform US equities, Gold, Metals, and Commodities to outperform.
Morning Market Commentary – Equity Market Observations
N-225 poised for major breakout, Emerging market equities to come back, Gold & Silver, Platinum & related stocks to move higher.
Morning Market Commentary & Weekly Charts – Global equity observations for August
Four major factors in Europe are improving: Euro GDP has bottomed, Consumer spending has bottomed (car sales show signs of improvement, Manufacturing starts to increase and Central Bank policy is becoming more stimulating. Hence, why we are recommending for our clients to increase weightings in European Equities.