Now, that we are past the middle of the summer, investors should reevaluate their current holdings, and pay close attention to the seasonal forces that likely will come into play in the short term. We are advising investors to invest along the seasonal trends:
Category Archives: Morning Market Commentary
Investment Strategy Update
We continue recommending for investors to reduce equity positions in G-10
markets into the last rally before the summer, as we are forecasting for a -12% to
-15% decline in European and US stocks to materialize.
Investment Strategy Update & Charts
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
Q2 end target of 1.18, and our 2017 EUR/USD target of 1.18 – 1.20.
Investment Strategy Update
In Europe, IHS Markit’s Eurozone Flash Composite Purchasing Managers’ Index
for May, seen as a good guide to growth, matched the previous month’s 56.8, its
highest since April 2011.
US Macro slowing, US$ & US equities Trump Dump
As we have been warning investors for the past 8 weeks, we have highlighted noticeable surface cracks in the US economy, which slowly are impacting how the US$, US bonds and US equities are performing.
Morning Market Commentary
Positive seasonal tendencies for the parts manufacturers can stretch
into the summer, however, with the US consumer toppling, we are expecting for
the period of seasonal strength for the Auto & components Industry to come to
an end earlier this year, hence why we are advising investors to sell/reduce all
stocks on the sector and wait for -10% to -20% lower prices by mid summer
before re-entering full allocations.
Morning Markets Commentary & Charts
In the US, the main event in the markets today will be the FOMC meeting. A rate hike
of 25bps seems a done deal, and seems fully priced into bonds and the USD, however market participants will be looking towards the statement regarding future rate hikes and a possible reduction in the Fed’s balance sheet.In the US, the main event in the markets today will be the FOMC meeting. A rate hike of 25bps seems a done deal, and seems fully priced into bonds and the USD, howeve market participants will be looking towards the statement regarding future rate hikes
and a possible reduction in the Fed’s balance sheet.
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%).
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.
Basic Resources & Metals Commentary & Charts
After some significant consolidation in the industry over the past 2 years, (M&A, capacity adjustments, strategic alliances, etc.) we had forecasted that the 2H of 2016 would be a turning point for basic resources pricing and outlook. At this point, we would like to reiterate that we are expecting for basic resources and metal prices to advance by another +25% in 2017 from current levels.
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 – $70 high-end price range for WTI for 2017.
Market Commentary & Charts
Economies like Russia, Germany and Japan, all having significant trade surpluses and also current account surpluses, have had a compression in interest rates over the past 4 months, however, US interest rates despite a lower growth rate and also despite a widening trade deficit and a growing current account surplus has seen its interest rates rise significantly more than those other economies.
D-day & market impacts
Trump win = US & global equity markets move lower,
US$ will decline by -20% over 12 – 18 months
commodities & alternatives will rise by 40%
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.
Market Commentary & Charts
In the Americas, US CPI core inflation fell to 2.2% y-o-y in September from 2.3% y-o-y in August. The Fed’s preferred measure for inflation is PCE core inflation, which has been running below the 2% target for 52 consecutive months and the upcoming September figure will make it 53 months.
Market Commentary & Charts
In the Americas, the US FED has grossly overestimated growth rates of the economy, and it appears that it the economic growth has slows down considerably. We start seeing in various leading indicators for the November and December 2016 data to likely be worsening.
Market Commentary & Charts
In the Americas, investors in the US are awaiting the minutes of the FOMC meeting are supposed to show the FED taking a clearer stand on when they are going to raise rates. The market is getting more convinced, one more time, like it did for the past 2 years so many times, only to be wrong, over and over again. The odds of a December rate hike increased yet again to 74.5% from 69.5%. The odds of two hikes increased from 5.5% to 7.4%.
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).
Morning Market Commentary
Not a lot of substance on differentiation of both candidates’ 4-year economic and socio-political pans. One hour into the debate, the candidates had failed communicating their priorities. There’s been no “on my first day in office …” or “the first bill I’ll sign …” or other similar promises. Trump is most animated about trade and immigration, but it’s harder to tell which issue, if any, Clinton is putting at the center of her campaign. The only noteworthy difference between both candidates highlighted in last nights debate was when they debated how to grow jobs and incomes; Trump mentioned cutting regulation, while Clinton vowed to boost manufacturing jobs; both touted their tax and trade policies.
Market Commentary & Charts
As an immediate reaction to no policy change by the FED, we see the US$ on the precipice of needing to deflate. All the arguments and hopes and hypes which propelled the US$ to its “temporary parabolic rise in 2014” are no longer in place at this time, and surely looking out over the next 12 – 18 months:
Morning Market Commentary & Charts
Federal Reserve officials continue to gauge financial markets by controversial policy speak. Equity markets moved sharply lower on Friday on “hawkish” comments on the Fed Fund rate by Eric Rosengren. Then yesterday “dovish” officials, such as Fed Governor Brainard were implying less of a chance for an increase in the Fed Fund rate. This is the perfect parody for global financial markets.Just imagine corporate executives acting like FED officials, and coming out with controversial statements about earnings expectations all the time, this would lead to serious SEC/FAC investigations on conflicts of interest. Or just imagine another foreign central Bank, like the ECB, or BoJ or the Central Bank of China to “mislead” financial markets the way that the FED is. Unimaginable.
Morning Commentary & Charts
We continue advising investors to reduce equities exposure and buy instead 10-
Year and 30-Year US treasuries into the weakest 2 months for equities ahead.
Morning Commentary & Charts
As we said before over the past 4 weeks, something has to give. And as of yesterday, it is the 10-Year treasuries that have started to break out, and the yield breaking support at 1,70% will likely go down towards our 2016 target of 1,40%. All short term technical indicators for the $TNX are in declining trends, RSI, MACD, 20-, 50- and 200-day moving averages.
Morning Commentary & Charts
The continuing weakness in the US$ Index helped commodities and US equity prices to rise yesterday.
AAPL SELL Update
The short-term technical outlook for AAPL is negative, RSI and MACD are negative, and so are the 14-day, 50-day and 200-day moving averages. The head-and-shoulders topping pattern that became confirmed upon the break below the neckline around $107 had a first downside target of around $83, however, inherently increasing risks are for AAPL to test support at the open gap charted two years ago of $71.
Oil Commentary & Charts
The Energy Information Administration reported a surprise drawdown in energy commodities, sending prices higher. The EIA reported that oil inventories declined by 3.4MN barrels, while gasoline inventories declined by 1.2MN barrels. The days of supply of each ticked lower as oil enters a period where demand typically outpaces production; the increased demand typically results in a decline in oil inventories between mid-May and the end of September, bookending the summer driving season.
Morning Market Commentary & Charts
The bear market for global equities is well alive and showing its claws one more time. Since December, we were warning of an initial equities rout in Q1 of the magnitude of -12% to -15%, we have seen increasing deterioration of both the technical outlook for global equities, and similarly for the fundamental (macro; earnings, valuations, DDM; political environment and geo-political risks) outlook and support for global equities.
Morning Market Currencies Commentqry
The US$ broke significant support and confirms an important topping pattern. The US$ remains below previous support of 93 that was broken during Monday’s session. Short-term (3 months), we are expecting for the US$ to decline towards 88.
Morning Market Commentary
In the US, Housing starts gave a disappointing glimpse into an area of the economy that is typically strong into the spring. Housing starts declined by -8.8% in March to a seasonally adjusted annual rate of 1.089 MN, below consensus forecast of 1.167 MN.
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
One phenomenon that should worry investors in US equities is the fact that corporate debt to income is at extremely high levels with the ratio of non-financial corporate debt to national income is nearly 45%, an elevated reading that suggests corporate balance sheets are not in particularly good shape as non-financial US companies have added nearly $2 TRN in debt to their books since 2008.
Morning Market Commentary
In the US, the US federal budget balance rose less-than-expected last month, official data today in a report by the Department of the Treasury showed that US federal budget balance rose to a seasonally adjusted US$ -108.0BN, from US$-193.0BN in the preceding month (vs. economists’ consensus to rise to US$ -104.0B last month).
Morning Market Commentary
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
Over the past 50 years, the S&P 500 Index has closed higher in April 70% of the time, averaging a gain of 1.5%. Historically, the first trading day in April is one of the strongest days of the year for the S&P 500 Index. During the past 20 periods, the S&P 500 Index gained 0.8% per period. A major reason is money flows entering the equity market coming from pension plans on the first trading day of Q2.
Morning Market Commentary
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.
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.
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.
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.
Market Commentary
This morning the Organization for Economic Cooperation and Development cut its global growth forecast for 2016 from 3.3% to 3.0% and warned that some emerging markets are at risk of exchange-rate volatility. The downgrade in forecasts is broadly due to disappointing incoming data for Q4 of 2015 and the recent weakness and volatility in global financial markets, which are affecting some emerging markets are particularly vulnerable to sharp exchange-rate movements and the effects of high domestic debt. The OECD’s revised global growth outlook is still to optimistic in our view, and we are expecting for major organizations like the OECD and IMF to continue to downgrade global GDP over time to our forecasted 2.4% levels for 2016.
Market Commentary
Over the past ten days, the risk perception has shifted from the Energy & Oil sector toward the banks sector, both in the Emerging markets but also in Europe, spreading to the US lately.
Morning Market Commentary & Charts
Since 2008, excessive quantitative easing tools were used, and implicitly reserve balances with federal reserve banks have ballooned in aggregate to over US$% TRN for the FED in, conveniently targeting to inflate equity prices in the process. As soon as these stimulus programs came to an end 6 weeks ago, so too did the rise in stocks. The recent equity market weakness can be linked directly to the decline in liquidity now that the Fed has entered a tightening cycle.
Asian Equity Markets Commentary & Charts
With the start of February, Asian equity markets have entered their period of seasonal strength, which starts in February and typically lasts into late April. As Japanese equities have retraced significantly from their highs in 2015, the BoJ on Friday surprised financial markets with a monetary policy change towards negative rates. The BoJ’s aim was to inflate assets, and to devalue the Yen further, and hence why we are seeing a good investment rational for investors to re-enter Japanese equities at current prices. A closer technical look at the Nikkei-225 shows that is in process of a clear reversal. Our 3- 6 months price target for the $NIKK is 20,150.
Morning Market Commentary & Charts
Barack Obama’s last State of the Union Address of his presidency. While the session following the speech is generally positive for the market, with the S&P 500 Index averaging a gain of 0.09% over the past 50 years, election years have shown a different result. The large-cap benchmark has declined by 0.18%, on average, in the session following the speech during election years, with only 5 of the past 12 events showing a positive outcome. The losses aren’t long-lived, however, with gains averaging 0.62% within one week of the event.
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 $SPX since early 2014, seemingly as “leading indicator”.
Currency Commentary & Charts
US$ 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
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
On average during the past 50 years, the S&P 500 Index reached its annual low on October 27th and entered into a period of seasonal strength that lasted until early May. However, exact date for the annual low varies each year by approximately one month either before or after October 27th. The charts below demonstrate.
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.
Continue reading
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$. The price of gasoline declined around -1.7%, while oil shed nearly -1.9%. But the bearish inventory report didn’t stop investors from continuing to buy energy stocks. While the period of strength for the energy stocks during the late summer and early fall is predominantly behind us, individual equity opportunities can continue to exist.
Morning Market Commentary & Charts
Investor sentiment indicators turn bullish on equities, bonds and Oil. The latest sentix Economic Indices, released yesterday, revealed a further decline in both Eurozone (EZ) economic expectations and current situation readings, while the EZ overall headline reading fell from 13.6 to 11.7 (lowest level since January).
Morning Market Commentary & Charts
A reversal the US$ 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 & Charts
We believe that both $WTI and individual company stock prices in the current market represents a historic buying opportunity. The period of strength for the sector ahead is from October to early December as thereafter demand for oil declines.
Morning Market Commentary & Charts
For the month, the S&P 500 and Dow are lower by over -6%, both closing below their respective 20-month moving average for the first time since September 2011. August’s return is a significant divergence from the average return for the market, according to the S&P 500 Index. The technical status of the broad market has notably deteriorated, suggesting stocks may not be free of further downside risk, as of yet.
Morning Market Commentary
For the month of August, we are expecting for a historical repeat for bond prices around the world to have their best month of the year. So far, for the past week, investors have been evaluating the deteriorating macro news, and re-allocated new money into the bond markets, just as we were predicting. Strength in the bond market, utilities and real estate over the past week signaled that investors are coming around to our views that the Federal Reserve is likely to postpone its first increase in the Fed Fund rate beyond September, which in return, will be a positive influence for equity markets.
Morning Market Commentary
US inflation continues to run below the Fed’s 2% target, which policymakers view as a “temporary result of the strong US$ 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
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
Housing starts for May were reported yesterday at a seasonally adjusted annual rate of 1.036 MN, down over -11% from the previously revised annual rate of 1.165 MN reported in April. A glimmer of hope is present in the Building Permits competent of the report, perceived as a leading indicator.
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.
Morning Market Commentary
As we predicted since our 2014 Global Investment Strategy, the $SSEC has been the star performer in 2014 and 2015 y-t-d, hitting our very aggressive 2015 price target of 4,900 last Friday, outperforming the S&P 500 Index by around 40%.
Morning Market Commentary
The average unfavorable period return over the past 20 years was –0.25%; the average changes slightly to –2.04% when unfavorable periods following below average favorable periods are isolated. Declines between May and October are definitely not a certainty, but it often is prudent to be conservative in equity allocations by reducing beta and correlation versus the market during this period of random performance.
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 Markets Commentary & Charts
Historically, when stock prices went up, bond prices went down and when stock prices went down, bond prices went up. This market phenomenon did not hold true in the past 7 years, since most global central banks have been turning up the floodgates. Thanks to most Central banks monetary policies around the world, financial markets are booming in virtually all corners of the world. Most global equity markets are trading at all-time record highs. Global real estate is booming at the same time, with record valuations in many countries, including both residential and commercial properties. Art collecting too is in vogue among the world’s wealthiest citizens.
Morning Markets Commentary & Charts
US stocks ended mixed yesterday with the Dow Jones Industrial Average and the Nasdaq Composite closing on opposite sides of the flat line. Q1 US company earnings so far are beating expectations, which is positive (albeit from a much reduced level as 3 months ago), but they are coming up light on revenue, which is bothersome. Not all of the shortfalls are attributable to the translational impact of the stronger US$, which makes even more for a sup-par grade for this earnings season.
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 Markets Commentary & Charts
In the US, the economic data fails to negatively impact the equity markets so far, particularly given the Fed’s continued accommodation. . The energy sector remains in a period of seasonal strength through May.
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
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 & Charts
After the FOMC meeting notes, it seems that Ms. Yellen is now altering the FED’s focus away from employment, GDP and other determining interest rate policies’ factors to one of the economic indicators, which we had been highlighting as one of our main benchmarks for our forecasts on FED related policy changes, and our 2015 assumptions on “No FED rate hike until 2016!”, namely consumer price inflation indicator (CPI).
Morning Market Commentary
We maintain our baseline forecast for 2016 of “No FED rate hike in 2016”, as the global inflationary pressures are still declining, and we see increasing macro-economical evidence of the US economy slowing, and of our baseline forecast becoming more widely be accepted both by central bankers and by market participants. Consequent to the market slowly adapting to our base line scenario, we do see a strong case for renewed allocations towards high yielding equities mostly outside of the US, particularly in the case of Japan and Europe, as those equities markets have entered their periods of seasonal strength until April for Japan, and mid-May in the case of Europe. In the US, dividend yields on S&P 500 stocks are competing with yields on 10-year Treasuries. Higher Treasury yields (i.e. lower Treasury prices) could prompt additional rotation into equities.
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.
CGI Morning Market Commentary. Dollar Double Top
021715 CGI Morning Market Commentary & Weekly Charts
Strategist Carlo Besenius’ weekly review of Equity, Fixed Income, Commodity and Currency markets
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 & 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
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.
091114 – CGI Morning Market Commentary – US Dollar Temporarily Overvalued
091114 CGI Morning Market Commentary Charts
Carlo Besenius’ views on the global markets – equities, fixed income, and currency.
042814 – CGI Morning Market Commentary: Alstom/GE or Alstom/Siemens?
We see better medium to long-term value creation in the Siemens proposal than in the GE possibility, both for Alstom, and also for either of the other two possible winners. This proposal is an unique opportunity to create two strong European Champions with global leadership aspiration in the fields of energy and transport, providing for a compelling industrial story while protecting the interests of both groups’ shareholders, employees, respective home countries France and Germany and ultimately the European interests as well. We do believe that Siemens is the most suited partner for Alstom, and clearly the favorite over GE, if any, however, there will be serious “antitrust” issues affecting any potential transaction, and we are advising for investors to rather focus on Siemens as an investment opportunity, rather than on any potential merger benefits, as we see little likelihood of neither takeover bids materializing.
Morning Market Commentary – Buy Chinese Equities $SSEC bottoming, Euro equity benchmarks continuing to gather momentum vs SPX
Global manufacturing data remains strong and it cannot be ruled out that the data out of China is distorted as a result of the upcoming Chinese New Year. Manufacturing activity in China typically declines into the Chinese holiday, which this year is on January 31. Despite the unexpected data point from China, manufacturing numbers continue to show signs of improvement, both in the US and Europe. Overshadowed by China’s disappointing manufacturing PMI report, January Flash Manufacturing PMI in the Euro-Zone was reported at the highest level since June 2011 at 53.9, firmly in expansion territory.
Although gold is not presently within its period of seasonal strength, which runs from July through to September, the metal typically does benefit from strength in metal prices at this time of year due to improving manufacturing demand.
Morning Market Commentary – Buy International equities, Energy, Oil
Much higher 10-year rates in 2014. Buy Intl. equities, EAFE, Canada, Germany, France, Spain, Japan over US as EAFE entered period of seasonal strength.
Energy, Oil & Utilities are the only ones that tend to produce higher than seasonal average returns under extreme cold weather conditions.
Morning Market Commentary – Metals, Oil, Buy Intl. Equities
EAFE to continue to outperform US equities, Chinese equities bottoming, Metals, Platinum & Palladium moving higher. Buy Intl. equities, EAFE, Canada, Germany, France, Spain, Japan over US as EAFE entered period of seasonal strength. Continue reading
Morning Market Commentary – Buy Intl. equities, Germany trade balance
Germany has a trade balance second to none on earth. Germany recorded a trade surplus of EUR 18.10 Bn in November of 2013. Germany is world leader in current account surplus in 2014.
We are expecting for the DAX 30 equities’ outperformance to extend through 2015. EPS expectations should stabilize alongside global GDP growth. We are forecasting DAX EPS FY 2014 to rise by 16% yoy to 760. (Vs. consensus 729) . Continue reading
Morning Market Commentary – DAX, German surplus
We are expecting for the DAX 30 equities’ outperformance to extend through 2015. EPS expectations should stabilize alongside global GDP growth. We are forecasting DAX EPS FY 2014 to rise by 16% yoy to 760. (Vs. consensus 729).
In the past 30 years that we have been active in the global equities capital markets arena, Germany has been focusing like no other nation and its corporate sector in re-inventing and restructuring and repositioning itself and its economy by constantly upgrading through technological, intellectual value-added, and by high capital expenditure driven innovative research and development. This has lead to the point that the majority of German companies to-date are world class leaders, second to none.
Morning Market Commentary – Buy into mini global equities’ correction
Short and intermediate technical indicators for most equity markets and sectors are overbought and showing signs of peaking. Midterm US Presidential Cycle years show that US equity markets show an average correction by the S&P 500 Index of 1.7% in the month of January followed by strength into mid-April. History appears to be repeating itself. Look for renewed seasonal buying opportunities in economic sensitive sectors following a brief period of weakness into January.
Our preferred equity markets like Germany, France, Spain, and Japan continue to outperform US benchmarks. We advise clients to add towards those countries’ equities and towards our favorite sectors, which continue to show seasonal strength, such as: …. 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 $SSEC is 3,000. Continue reading
Morning Market Commentary – SPX & DOW in seasonal correction AAPL “Sell/short” note
US equity markets have entered their annual period of seasonal weakness. Seasonal tendencies for stocks turn firmly negative on September 16; average loss for the S&P 500 Index over the three weeks to follow is -2.5%. The DJIA has more often underperformed during the May to October time frame with a brief counter-trend rally occurring in July. September remains clearly the worst calendar month for stock market performance.
Morning Market Commentary – Currency & trade balance observations
As previously stated, we had expected the deficit to climb back to US$ 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 – 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 – Macro Economic
We are advising clients to take the current market opportunity to sell stocks prior to the peak period of seasonal weakness ahead in September and October. Seasonal tendencies once again turn positive for broad market indices at the end of October.
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 – Q3 Asset allocation assumptions
N-225 poised for major breakout, Emerging market equities to come back.
Morning Market Commentary – August historically a down-month
Historically, the month of August has been cruel to equity investors. August during the past 62 periods is the fourth worst performing month of the year for the S&P 500 Index, third worst for the TSX Composite Index and Dow Jones Industrial Average and second worst for the NASDAQ Composite Index. Weakest part of the month occurs in the first half. Worst performing country in the month of August, of the established international equity markets, is the German DAX, posting an average decline of -2.0% over the past 20 years; positive returns remained evident more times than not with only 8 of the past 20 periods ending with a loss.
Best performing country is the United Kingdom with the FTSE posting an average gain of 0.8% in the month of August, positive 14 of the past 20 years.
Morning Market Commentary – Mixed Signals for Global Equity Markets
We see three significant threats to impact equity market strength ahead, which we believe global investors have not taken adequately into account: Rising US$; Surging Interest Rates and Rising Crude Oil, prices.
Morning Market Commentary – Global equities summer blues?
Markets opened in positive territory on Friday as the FTSE 100attempted to rebound after a dramatic three per cent drop the day before following the Federal Reserve’s announcement to scale back stimulus later this year.
London’s benchmark index tumbled an eye-watering 189 points on Thursday, falling 2.98% to 6,160 as markets reacted to comments from Fed Chairman Ben Bernanke, who said that quantitative easing could come to a complete halt in 2014 if the economic recovery gains momentum. Disappointing factory-activity data from China also hammered sentiment yesterday, sending the UK index to lows not seen since mid-January.
Equity markets outside of North America recorded significant technical deterioration.
Morning Market Commentary – Buy N-225, Short Yen
We believe that the correction for Japanese Yen and inherently for the N-225 has been completed, and are advising our clients to buy Japanese stocks at current levels, and to short the Yen against the US$ and against the EUR at current levels. We maintain our year-end 2013 price targets for the US$/Yen at 112 and for the N-225 at 17,200. Continue reading
Morning Market Commentary – All about the Nikkei
Fundamentally and long-term focused however, we continue to advise our clients to add towards Japanese equities. Investors should focus on both domestic asset reflation stock plays in Japan, and on Japanese companies with strong exporting profiles, as the Yen weakness will continue to improve their overall competitiveness and earnings capabilities in the coming years. Continue reading
Morning Market Commentary – AAPL “Sell/Short” reiteration, SPX Sell signals clear
Apple stock traded below US$ 400 for the first time since 2011, just prior to the exuberant and parabolic rise to US$ 705 in 1H 2012. Yesterday APPL fell 5.50% following a weak sales outlook from key chip supplier to Apple, Cirrus Logic. Shares of AAPL are down around 42% since the stock peaked in September of last year, when we put a “Sell/short” recommendation on AAPL at US$ 685, this amidst concerns that Apple is losing its market dominance.
Morning Market Commentary-Major breakdowns for US stocks, sectors, Oil, Gold, Silver, WTI, another -15% downside risk
Equity markets around the world recorded significant technical weakness yesterday. Much of the weakness was recorded prior to the Boston explosions. The explosions accelerated weakness near the close. The 9.1% one-day slump for the price of gold was the steepest fall in 30 years. Gold prices had recovered by as much as 2.0% this morning. The CME Group Inc. said yesterday it was the minimum collateral requirements for trading in benchmark gold, silver and other precious-metals futures contracts. The CME also raised the margin to trade palladium by 14%, and for platinum by 19%.