Category Archives: Oil, Gas & Energy
Q1 2019 Global Markets Outlook & Investment Strategy
For Q1 2019, we see best alpha opportunities for investors in the G-10 equities, particularly in global Consumer goods, industrials, Manufacturing, Utilities, Insurance. Although globally equities are now less expensive, US equities are currently representing the highest valuation risk, with headwind of a “too strong” USD not factored in correctly by analysts yet..
Weekly Equities Strategy Update
We still reommend that investors should reevaluate their current holdings, and pay close attention to the seasonal forces that likely will come into play in the short term. Seasonally, the next period of strength for US, EU and Asian equities comes into play in the month of October.
Weekly Global Equities Strategy Update
US economic focuses this week are on the FOMC announcement on the Fed Fund rate on Wednesday and the July Employment report on Friday. We think for the coming weeks, yields for the 10-Year are capped at the flag’s implied target of 3.14%, the highest level since mid-2011, implying a much faster pace of tightening, how might that affect equities?
Q3 Global Markets Outlook & Investment Strategy
Globally, equities are getting expensive, with US equities currently representing the highest valuation risk, with some tailwind benefits of a weaker USD fading temporarily. For Q3 2018, we see increased risks for investors in the G-10 equities, particularly in global Auto’s, Financials, Banks, Consumer Goods.
Weekly Investment Strategy Update & Charts Update
We clearly see better value still in Asian and EU stocks, and for investors to
overweight in both, relative to US equities and achieve higher returns until yearend
2017.
Weekly Investment Strategy Update & Charts Update
At a market level, investors’ medium-term strategic bias on equities continues to show signs of moving onto a less positive path. The latest sentix survey suggests sentiment and investors’ strategic bias on Eurozone equities has modestly weakened.
Weekly Investment Strategy Update & Charts Update
The International Monetary Fund today published a report indicating that The global economic recovery has strengthened financial stability but easy monetary and financial conditions against a backdrop of sluggish inflation is elevating medium-term risks. The IMF upgraded its global economic growth forecast for 2017 by 0.1% point to 3.6%, and to 3.7% for 2018, from its April and July outlook, driven by a pickup in trade, investment, and consumer confidence.
Weekly Investment Strategy Update & Charts Update
Investors increasingly poles apart on Equities versus Bonds The latest sentix survey
indicates that investors remain resolutely upbeat on equities and deeply downbeat on
bunds. As a result, the sentiment gap between bunds and Eurozone equities is now
large and growing, albeit the gap has yet to reach historic lows.
Weekly Investment Strategy Update & Charts Update
In the Americas, Friday’s release of the publicly available data from ECRI puts its
Weekly Leading Index (WLI) at 143.4, unchanged from the previous week. Y-o-y the 4-week moving average of the indicator is now at 2.83%, down from 3.09% last week and its 11th consecutive week of declines. The WLI Growth indicator is now at 0.0, also down from the previous week, it’s lowest since March of 2016.
Weekly Investment Strategy Update & Charts Update
In the Americas, the US economy is on track to grow at a 3.7% annualized pace in Q3, the Atlanta Federal Reserve’s GDP Now forecast model showed on Friday, following the release of the government’s July payrolls report.
Weekly Investment Strategy Update & Charts Update
We have highlighted since May 5th that signs of a seasonal peak in European and
now also for North American equity markets had arrived. The Euro Stoxx 600, the
DAX and the CAC reached their seasonal peaks on May 13th.
Weekly Investment Strategy Update & Charts Update
We continue to see the Euro to stabilize further and continue to rise. Safe heaven
currencies like the US$ and like Gold will reverse course and decline. As per our
Q3 Global Investment Outlook & Strategy, the EUR/US$ is on track to rise to our
Q3 end target of 1.18, and our 2017 EUR/USD target of 1.18 – 1.24.
Weekly Investment Strategy Update & Charts
As per our Q2 Global Outlook and Investment Strategy, we have been advising
our clients to reduce exposure to the US$ ($USD) and US equities ($SPX), and
instead increase allocations into US long bonds, namely 10-Year Treasuries
($TNX), and into EU and EM currencies and equities, which form a tactical Asset
allocation call has been spot on so far in the current quarter.
Weekly Investment Strategy Update & Charts
Europe is emerging as a region that offers a stable investment environment, just as the fate of other economies is harder to predict. The UK is facing complex divorce
negotiations with the EU. There are significant economic downsides from Brexit for the UK. The damage to the EU economy is probably limited, and the impact might well be positive. Especially if companies and financial institutions decide to move to the continent.
2017 Q3 Global Markets Outlook & Investment Strategy
Globally, equities are getting expensive, with US equities currently representing the highest valuation risk, as US corporate earnings will be revised downwards, partly due to the continued higher weighted US$ and its negative translational impacts.
Weekly Investment Strategy Update
World trade flows grew in Q1, continuing a recovery that began in 2H of last year in an indication that the global economy may be set to enjoy a year of stronger growth. World trade flows grew at the slowest pace since the financial crisis in 2016 as a whole, but there are signs 2017 will mark a rebound.
Weekly Investment Strategy Update & Charts
We are seeing increasing signs of a very similar credit bubble in the US as in 2006/2007, and investors should consequently diversify risks by re-allocating more assets outside of the US equities and credit markets.
Weekly Investment Strategy Update & Charts
In the Americas, US retail sales and CPI data released on Friday gave further confirmation that the US economy is slowing.
Weekly Investment Strategy & Charts
Since March of last year, we also started to see increasing macro evidence that
the Euro area was going to be a more stable, secure and reliable place to invest
in than the UK and US, but our call fell mostly on deaf ears until 2017. Europe has
emerged once again as a region that offers a stable political and macro economic
environment, just as the fate of other economies is harder to predict.
Weekly Investment Strategy & Charts
As per our Q2 Global Outlook and Investment Strategy, we have been advising
our clients to reduce exposure to the US$ ($USD) and US equities ($SPX), and
instead increase allocations into US long bonds, namely 10-Year Treasuries
($TNX), and into EU and EM currencies and equities, which form a tactical Asset
allocation call has been spot on so far in the current quarter.
Weekly Investment Strategy & Charts
Headline prices in the US, UK and Europe are already at or above 2%. At the same time, seven central banks globally are still running negative interest rate policy (NIRP), while aggregate global quantitative easing continues to expand at breakneck speed. Looking ahead, we think central bank liquidity, the major factor that helped support risky assets during the post-crisis era, might peak by early 2018.
Weekly Investment Strategy & Charts
Looking ahead, we think central bank liquidity, the major factor that helped
support risky assets during the post-crisis era, might peak by early 2018.
Weekly Investment Strategy & Charts
Given the AHCA defeat last Friday, financial markets have to re-assess reality versus wishful thinking. As we had been writing for the past 5 weeks, US assets (US$ and US equities) had been very overbought, and had failed to move towards new highs, and double tops had been put in place. We see Friday’s equity markets’ reversal as a major catalyst for trend change, and the catalyst for investors to focus on major asset re-allocation thinking.
Weekly Investment Strategy & Charts
Investor sentiment towards emerging market (EM) equities remains closely
linked with views on commodities. It is notable then that optimism on
commodities as a grouping has been tempered in the past month, even as EM
sentiment has headed higher.
Weekly Market Commentary & Charts
We continue recommending for investors to use the current US$ strength and
diversify into the seasonally better performing European and EM equities. As we
have written in the past 3 months, we see a stronger case in favor of higher
European allocations until mid May.
Weekly Market Commentary & charts
We continue recommending for investors to use the current US$ strength and
diversify into the seasonally better performing European and EM equities. As we
have written in the past 3 months, we see a stronger case in favor of higher
European allocations until mid May.
Morning Market Commentary & Charts
On the economic front, US Q4 GDP growth was confirmed at its second reading, official data yesterday showed. The Bureau of Economic Analysis confirmed Q4 growth at 1.9%. (Vs. consensus forecast Q4 GDP to be revised upward to 2.1%).
Weekly Market Commentary & Charts
We continue recommending for investors to use the current US$ strength and
diversify into the seasonally better performing European and EM equities. As we
have written in the past 3 months, we see a stronger case in favor of higher
European allocations until mid May. We believe that the political and sovereign
tail risks for Europe, particularly with respect to potential Eurozone
disintegration, are fully priced in the weak Euro and European equities.
Weekly Commentary & Charts
We continue recommending for investors to use the current US$ strength and
diversify into the seasonally better performing European and EM equities. As we
have written in the past 3 months, we see a stronger case in favor of higher
European allocations until mid May. We believe that the political and sovereign
tail risks for Europe, particularly with respect to potential Eurozone
disintegration, are fully priced in the weak Euro and European equities.
Weekly Market Commentary & Charts
AUD and CAD turn higher, USD weakness is gaining breadth.
Commodities break to the upside (Oil, Copper, Steel, Platinum, Palladium).
Emerging Market equities break out to the upside (Brazil; India; China).
Stock/Bond ratio ready to break higher.
Weekly Market Commentary & Charts
Continue to Sell/short US$ against commodities based currencies like
BRL, AUD, CAD, but also against the EUR
Overweight US 10 Year Treasuries
Continue to Overweight Commodities, Energy, metals
Overweight foreign stocks short and medium term, namely European
(German, French, Spanish, Dutch), Canadian, Japanese, Chinese, Russian
and Brazilian equities
Underweight US & UK equities
Morning Market Commentary & Charts
For the past 3 years we have been highlighting a disturbing and fairly overlooked
fact, namely that investors seem to like hype and hope over reality, particularly
when it comes to comparing investment outlook and opportunities between the
US and Europe, but also by comparing the US to the ROW.
Weekly Market Commentary & Charts
Investors are now clearly waiting for concrete economic policies from the Trump administration, with both the upward move in US yields and the US$ losing some momentum. Furthermore, we think there is an increasing chance that global risk sentiment could be affected by a possible standoff between China and the US. Longer term, we could see risks rise to a global recovery from more economic protectionism.
Weekly Market Commentary & Charts
The US$, (and all US$ priced and related asset classes like US equities and US
treasuries, commodities) are simply overbought, overheld, overvalued and
overdue for a correction. We see better value in foreign equity markets,
particularly as Japanese, Chinese and European equities are in the strongest
period of seasonal strength until end of April.
Oil & Energy Market Commentary & Charts
For 2017, we are forecasting that commodities’ prices in general will rise by about 15%, however for Oil prices not by nearly as much as in 2016. We maintain our $67 – $70 high-end price range for WTI for 2017.
Weekly Market Commentary & Charts
We are recommending for investors to hold seasonally attractive equity positions that remain in an intermediate uptrend and continue to outperform the S&P 500
Index (e.g. precious metals, technology, selected Canadian energy, DIS, UNH,
AAPL, etc.). Profit taking in other positions is appropriate. As highlighted in our
Fixed Income commentary, year-end portfolio adjustments continue, most
notably the switch to fixed income securities from equities.
Market Commentary & Charts
Economies like Russia, Germany and Japan, all having significant trade surpluses and also current account surpluses, have had a compression in interest rates over the past 4 months, however, US interest rates despite a lower growth rate and also despite a widening trade deficit and a growing current account surplus has seen its interest rates rise significantly more than those other economies.
Weekly Market Commentary & Charts
2017 seems for most an inherently tricky year to forecast, since the political shift in
power creates so many unknowns. Policy implementation could play a big role in
shaping economic output and corporate profitability, and both of these factors matter
immensely to stock performance.
Weekly Market Commentary & Charts
We are advising to stick with the seasonal trend in equity prices for the next two
weeks, but are warning investors to prepare to lock in significant profits before
Inauguration Day on January 20th.
Market Commentary & Weekly Charts
We believe that the global financials sector is likely to see a massive comeback
in 2017, as a rising rate environment combined with attractive valuations a
positioning, in the financials sector could be the perfect hedge against further
interest rate hikes in the portfolio.
Weekly Market Commentary & Charts
In the US, the strong US$ is having continued negative affects on the US economy in many different ways. The Census Bureau published its advanced look at international trade in the US and the result showed the deficit widened to $62.0 BN from $56.5 BN previous. Continue reading
Weekly Market Commentary & Charts
The very reliable long-term equity/bond model favor bonds over equities, therefore, investors should continue to overweigh their portfolios with bonds over stocks for safety and better return. Can investors’ temporary blindness become the “trumping” reason to go long bonds after the inherent correction of the 10Year treasury yields moving to our 2.35% yield target? We think so.
Weekly Market Commentary & Charts
Economic and political focus this week is on results of the election on Tuesday. Other
economic reports this week are not expected to be market movers.
Weekly Market Commentary & Charts
Economic focus in the US next week is on the FOMC meeting. Consensus is that the
Fed Fund rate will remain at 0.25%-0. 50%, but the Federal Reserve will give a clear
signal about increasing the Fed Fund rate by 0.25% at its December meeting. Other US economic reports are expected to confirm that the US economy is growing at a slow but steady rate.
Weekly Market Commentary & Charts
The time to buy into capital goods, mining, and railroad and energy stocks has never been better than right now.We continue recommending for investors to buy commodities such as crude oil and gold.
Market Commentary & Charts
As per our 2016 Global Investment Outlook & Strategy which we published last
year in December, when comparing Real Assets versus Financial Assets, the
following chart shows that real assets are at all-time lows versus financial assets.
The time to buy into capital goods, mining, and railroad and energy stocks has
never been better than right now.
Weekly Market Commentary & Charts
Again, the way we continue seeing it, the macro climate in both the US and most
of the G-10 countries is still fading, global trade still depressed, and capacity
global utilization still well under 70%, we see no rational reason as to why the
FED should raise rates this year, or in 2017.
Weekly Market Commentary & Charts
The period of uncertainty for world equity markets continues. Many equity markets,
commodities and primary sectors have returned to the top of their trading range
previously reached in mid-July. Establishment of another intermediate uptrend is
unlikely prior to the US Presidential election on November 8th. Prospects following the Presidential election are positive. Seasonal influences begin to change in the month of October.
2016 Q4 Global Markets Strategy & Equities Outlook
As highlighted in our 2016 Global Investment Strategy & Outlook, the global macro fundamentals had been slowing as we anticipated, and consequently Central Banks in the US, Japan and Europe have been adding liquidity to dampen the slowdown. Contrary to most “sell-side” big firms, which had been predicting 4 rate hikes by the FED in 2016 (GS, JPM, UBS, DB to name just a few) besides “buy-siders” (of the likes of Bill Gross/Pimco/Janus, Mohammed El Erian/Allianz and too many others to name).
Morning Market Commentary
The WTO estimated global trade volume is set to grow just 1.7 percent in 2016, a much lower forecast compared with April’s 2.8%. It marks the first time in 15 years that international commerce has grown more slowly than the world economy. World trade has been in decline since 2H 2014 (totally coincides with the parabolic rise of the US$ since June 2014).
Weekly Market Commentary & Charts
Slower than consensus economic news from the US, Japan, Brazil and smaller parts of Europe last week proved to be good news for markets. Additionally, as we were
expecting, the Federal Reserve decision to maintain the Fed Fund rate at .25%-0.50% on Wednesday afternoon boosted equity, commodity and bond prices. Economic news this week is expected to confirm an additional slowdown in US economic growth in Q3.
Oil Update – oil
We’ve opined that the only way a coordinated production freeze can be reached is
if the major producers become convinced that they [and all the others] were maxed
out on capacity—making the implementation of a production freeze totally
irrelevant.
Weekly Market Commentary & Charts
The period of increased volatility and increasing weakness for world equity
markets continues until the end of October.
Strategy Update Oil
WTI crude oil has failed to hold its pivot point ($44.73) on the weekly chart. Support exists around $41 on both the weekly and daily charts but if support fails to hold (and we believe that it won’t), WTI crude oil is immediately vulnerable technically to the mid-$30’s.
Weekly Market Commentary & Charts
Pessimism remains the dominant theme on Financials, with sentiment readings on
Insurance hitting a two-year low and Banks firmly entrenched at the low-end of their
historic sentiment range versus the market.
Morning Commentary & Charts
The continuing weakness in the US$ Index helped commodities and US equity prices to rise yesterday.
Morning Commentary & Charts Memorial Day Thoughts
This year’s Memorial Day, Americans are enjoying “most memorable low gas prices” for the start of the summer driving season in over a decade, with the weighted average price of regular gas is $2.30 per gallon, -17% lower than this time last year.
Weekly Market Commentary & Charts
Global equities have passed their peak of annual seasonal strength on May 11th,
we are advising investors to aggressively sell Chinese, Japanese, US and EU
equities immediately, as many macro-economic, geo-political and political risks
will likely rise over the next 2 – 4 months into the summer.
Oil Commentary & Charts
The Energy Information Administration reported a surprise drawdown in energy commodities, sending prices higher. The EIA reported that oil inventories declined by 3.4MN barrels, while gasoline inventories declined by 1.2MN barrels. The days of supply of each ticked lower as oil enters a period where demand typically outpaces production; the increased demand typically results in a decline in oil inventories between mid-May and the end of September, bookending the summer driving season.
Weekly Market Commentary & Charts
Global equities have reached their peak of annual seasonal strength in late April/mid May, we are advising investors to aggressively sell Chinese, Japanese, US and EU equities immediately, as many macro-economic, geo-political and political risks will likely rise over the next 2 – 4 months into the summer.
Weekly Market Commentary & Charts
Now that global equities have reached their peak of annual seasonal strength in
late April/mid May, we are advising investors to be aggressively selling Chinese,
Japanese, US and EU equities, as many macro-economic, earnings outlook and
geo-political risks will rise over the next 2 – 4 months into the summer.
Morning Market Commentary & Weekly Charts
Economic focus this week is on the FOMC meeting on Tuesday and Wednesday. Consensus is that the Federal Reserve will maintain the Fed Fund Rate at 0.25-0.50%. However, the bond market began to respond last week to anticipation of message by the Fed that it plans to increase the Fed Fund rate soon based on incremental evidence that slow US economic growth is accelerating.
Morning Market Commentary & Weekly Charts
Financial leaders from the G-20 nations said on Friday they were heartened by a recent recovery in financial markets, but warned that global growth was “modest and uneven” and threatened by weakness in commodities-based economies
Morning Market Commentary
Oil demand/supply balance is starting to adjust, pretty much as we were predicting in our 2016 Global Investment Strategy Outlook that it would by the beginning of the summer 2016.
Morning Market Commentary
In the US, the US federal budget balance rose less-than-expected last month, official data today in a report by the Department of the Treasury showed that US federal budget balance rose to a seasonally adjusted US$ -108.0BN, from US$-193.0BN in the preceding month (vs. economists’ consensus to rise to US$ -104.0B last month).
Morning Market Commentary & Weekly Charts
Global data: “Weak foreign economic conditions, a persistently high exchange value of the US$ and tighter financial conditions—will continue to restrain US economic growth for a time and thus collectively imply a temporarily low level for the neutral rate of interest.” Central bank limit: “financial market turbulence provided an important reminder that the ability of central banks to offset the effects of adverse economic shocks might be limited, particularly by the low level of policy interest rates in most advanced economies.”
Morning Market Commentary
In the short run the absolute level of economic activity is lower than it should be, with financial market finding it hard to advance much further without concrete proof that the economy is truly healthy. Members of the Federal Open Market Committee were concerned about the threat of slower global growth and low inflation when they voted to keep interest rates unchanged last month, the minutes of the central bank’s March 15-16 meeting revealed. Several also cautioned against an increase in April, saying it was signal a sense of urgency about the US economy that they did not think appropriate.
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.
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
Global equity markets rebounded moderated over the past week. The UK’s FTSE 100 was the top performer, up 2.45%. The Shanghai Composite Index was the biggest loser, down 3.25%. India’s SENSEX 30 was the other index with a weekly loss, down 2.34%. Six of eight-index world watch list posted gains, but the average of the eight was only 0.47%, a sharp decline from the 4.51% average of the previous week.
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 & Charts
The Russell 2000 Small Cap index was down -20.4% from the peak in June 23rd 2015, crossing the -20% bear market threshold. The $RUT is already below support that represents the neckline of its head-and-shoulders topping pattern. Downside potential is to the 2007 and 2011 highs around 860. The breakdown falls within the period of seasonal strength for small cap companies that runs through to the start of March. Risk aversion is weighing on the notorious January effect when investors tend to take on risk at the start of the year. The $RUT has been underperforming the $SPX since early 2014, seemingly as “leading indicator”.
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.
Strategy Update US Oil
Back on December 2nd we temporarily deviated from our long-standing negative view on oil when we wrote that “Absent a new catalyst to drive oil lower through the end of the year, we anticipate a rally in crude and oil-related stocks to emerge and suggest establishing trading positions in the days immediately prior to the December 16th Fed rate decision… Fears of rising production from Iraq, Iran and even Libya coupled with the lack of a new demand catalyst will likely return downward pressure on crude within weeks.
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).
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.
Strategy Update US Oil
We do not share the viewpoint that oil could hit $20 per barrel, as the Saudis not long ago would have us believe. Yet quite a few high profile commodity strategists would also have us believe that the price of oil has nowhere to go but down. There’s some irony in that statement since we’ve written since May that oil prices were headed lower in the near term and would make new yearly lows by October, which they did in August before rallying to, but failing to hold, the $50 level last month. But in our view volatility is likely to remain pervasive as prices head for an eventual unsuccessful retest of the August low of $38. However, longer term we believe that the bigger surprise is that oil prices could recover more strongly than indicated by industry executives or the futures market in 2016 as demand and supply fundamentals could rebalance more rapidly than currently anticipated by market participants. In the interim, oil prices will likely continue to frustrate bulls and bears alike.
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 & 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 & Weekly Charts
Seasonality Trends February and September have historically been the weakest months for the European major indices, and also for the S&P 500, with December as the strongest. May – September is seasonally weaker for returns as compared to upticks seen in October – May. (Look at page 9 – 13 for the major equities benchmark seasonality charts)
Morning Market Commentary
The rally in cyclical equities was necessary for further gains in broad market benchmarks. Material stocks rallied as we expected over recent days on the back of the weaker US$. The price of gasoline declined around -1.7%, while oil shed nearly -1.9%. But the bearish inventory report didn’t stop investors from continuing to buy energy stocks. While the period of strength for the energy stocks during the late summer and early fall is predominantly behind us, individual equity opportunities can continue to exist.
Morning Market Commentary & Charts
Investor sentiment indicators turn bullish on equities, bonds and Oil. The latest sentix Economic Indices, released yesterday, revealed a further decline in both Eurozone (EZ) economic expectations and current situation readings, while the EZ overall headline reading fell from 13.6 to 11.7 (lowest level since January).
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 & 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.
CGI Strategy Update: US Oil
We’ve been writing since June that oil prices would continue to slide. In our last
update on July 13th, we lowered our near-term target for WTI crude to $46 per
barrel. We believe that oil prices will plumb new lows over the next two months. In our judgment, investing (or worse, speculating) in the energy sector today at current levels too closely resembles catching a falling knife. Wait for a better opportunity…it’s coming.
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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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