Senior Relationship Manager
Summary: Are Markets too complacent?
Good Morning,
According to a Reuters poll, The U.S. Federal Reserve will hike by 25 basis points in May and hold rates steady for the rest of 2023, the poll also indicated a minor recession this year was likely. This remain in contrast to what traders believe – and trade. There is agreement on a hike in May but traders expect 2 cuts before year end after that.
It is exactly this kind of disagreement which makes markets interesting only one of the two can be right and the other will suffer losses.
Indexes hardy moved yesterday with the big three US within 0.25%, even if we saw some single stocks with larger moves. Tesla disappointed in terms or results and traders were not fully buying into Elon Musk`s story: “It's better to shift a large number of cars at lower margin and harvest that margin in the future as we perfect autonomy" nevertheless the stock fell to 169 from the close of 180.
With the uncertainty ahead, volatility seems to be underestimated, the Vix, the expected volatility of the S&P 500 shares is at the lowest since 2021…
A global investor survey by JP Morgan shows that 35% of investors see commercial real estate as the cause of the next market turmoil followed by the US debt ceiling and Geo Politics. European Banks are less exposed than their US counterparts, US Houses average 17% of their loan portfolio, European only 6% (Q2 2022)
The US 2 year rate remains near 4.2% and the USD Index at 101.90, EURUSD 1.0955, GBPUSD 1.2425 and USDJPY 134.80.
Gold and Silver are extremely interesting to watch and trade at the moment, while overall precious metals seem to follow the rate story, there are very sharp moves seemingly caused by interested parties to move the market.
Since yesterday morning, EURUSD traded in a 0.5% range silver 3% and gold 2.1%. Thie 1 month implied volatility is 7.7% for EURUSD, 14,3% for XAUUSD and 25.3 for XAGUSD. Our Kim Cramer points out that from a technical level a correction is due: Gold and Silver have formed top and reversal patterns. A correction seems likely to unfold over next few days
I expect Tesla result post-mortems and the rate/growth story to drive the markets today and tomorrow as we have several Fed speakers alongside inflation and confidence data.
While the market seems rather calm, I would not be surprised if we saw sudden sharp moves – there are many possible causes for severe swings.
Thursday 20 April
Blackstone, American Express, Comerica, Fifth Third, Huntington, KeyCorp, Sunovus, AT&T, Union Pacific, CSX, Philip Morris, DR Horton, CATL, Tryg, Nokia, Sartorius
Friday 21 April
Procter & Gamble, Regions Financial, Schlumberger, Freeport-McMoRan, Jinko Solar, SAP, Sandvik, Investor
Thursday 20 April
Friday 21 April
Hong Kong
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.