InvestMacro

By JustMarkets 

In the run-up to the European session yesterday, there was news about the sale of Silicon Valley Bank to another bank, First Citizens Bancshares, one of the most prominent regional banks in the United States, which could become one of the top 20 banks in the United States. The Federal Deposit Insurance Corporation (FDIC) has confirmed that all of SVB’s deposits and branches will go under the new management. Shares of Citizens Bancshares jumped by 53% yesterday. The deal helped calm investor fears about the banking crisis. There are also hopes for additional support for bank financing as the US authorities are discussing expanding emergency lending facilities. At the close of the stock market yesterday, the Dow Jones Index (US30) gained 0.60%, and the S&P 500 Index (US500) added 0.16%. The Technology Index NASDAQ (US100) decreased by 0.47% on Monday.

Most economists predict that the United States is likely to enter a recession this year and face high inflation in 2024. More than two-thirds of respondents to the National Association for Business Economics (NABE) indicated that inflation would remain above 4% later this year.

Minneapolis Fed President Neel Kashkari said Sunday that central bank officials are watching the situation very closely to assess whether bank stress has led to a credit crunch that has threatened to tilt the economy into recession.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) increased by 1.14%, France’s CAC 40 (FR40) added 0.90%, Spain’s IBEX 35 (ES35) raised by 1.44%, and Britain’s FTSE 100 (UK100) closed down by 0.90% on Monday.

Bank of England Governor Andrew Bailey said yesterday that inflation remains the main driver of monetary policy decisions. Bailey also made it clear that the bank would be prepared to provide tighter monetary policy if signs of persistent inflationary pressures became more evident.

In Germany, 24-hour strikes called by the Verdi union and the railway and transport union EVG have hit Europe’s largest economy. Airports, including Germany’s two largest in Munich and Frankfurt, suspended flights, while railway operator Deutsche Bahn canceled rail services. The Airports Association estimated that 380,000 airline passengers were affected. In Frankfurt alone, nearly 1,200 flights were canceled for 160,000 passengers. Employees are pushing for wage increases to reduce the impact of inflation, which reached 9.3% in February. Germany, which was heavily dependent on gas from Russia before the war in Ukraine, has been hit particularly hard by the price increase as it struggles to find new sources of energy.

Russian Deputy Prime Minister Alexander Novak said Moscow is close to reaching its goal of cutting oil production by 500,000 barrels per day (BPD) to about 9.5 million. Russia is trying to keep oil prices from falling, as oil and gas have become almost the only source of income for Russia since sanctions were imposed for its invasion of Ukraine. Russian President Vladimir Putin’s plans to deploy tactical nuclear weapons in Belarus further increased tensions in Europe, which contributed to the rise in oil prices yesterday.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.33% yesterday, China’s FTSE China A50 (CHA50) decreased by 0.48%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.75%, India’s NIFTY 50 (IND50) gained 0.24%, and Australia’s S&P/ASX 200 (AU200) was positive by 0.10% by Monday’s end.

China’s industrial profits fell by 22.9% in the first two months of this year. Factories and large industrial companies struggled to recover from COVID-related disruptions. Overall, investor sentiment in Asia remains jittery due to concerns about banking stress and its impact on global growth.

S&P 500 (F) (US500) 3,977.53 +6.54 (+0.16%)

Dow Jones (US30)32,432.08 +194.55 (+0.60%)

DAX (DE40) 15,127.68 +170.45 (+1.14%)

FTSE 100 (UK100) 7,471.77 +66.32 (+0.90%)

USD Index 102.83 -0.28 (-0.27%)

• – Australia Retail Sales (m/m) at 03:30 (GMT+2);
• – Japan BoJ Governor Kuroda Speaks at 07:00 (GMT+2);
• – UK BoE Gov Bailey’s Speech at 11:45 (GMT+2);
• – US Richmond Manufacturing Index (m/m) at 17:00 (GMT+2);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By ForexTime 

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

At the close of the stock market on Friday, the Dow Jones Index (US30) increased by 0.40% (+1.15% for the week), and the S&P 500 (US500) added 0.41% (+1.37% for the week). The NASDAQ Technology Index (US100) gained 0.31% on Friday (+1.80% for the week).

The Federal Reserve raised interest rates by 25 basis points last week, in line with expectations, but signaled that the hike cycle might be coming to an end in response to nervousness about US banks after the unexpected collapse of two medium-term regional small banks. According to analysts, the turmoil in the banking sector, which caused turmoil on Wall Street earlier this month, is likely to lead to a credit crunch for households and businesses in the coming months, creating a meaningful process of disinflation. This will ease the pressure on the central bank, limiting the need for overly restrictive policies. The economy does not yet reflect the real problems that will result from a significant tightening of lending standards, but the negative effects will soon become visible.

While Fed officials still view the possibility of additional rate hikes as a high probability, financial markets are now leaning toward a probability (85%) that there will be no rate hike at all at the Central Bank’s next policy meeting in May.

Equity markets in Europe were mostly down on Friday. German DAX (DE30) decreased by 1.66% (+1.64% for the week), French CAC 40 (FR40) fell by 1.74% (+1.65% for the week), Spanish IBEX 35 (ES35) lost 2.10% (+1.26% for the week), British FTSE 100 (UK100) was down by 1.26% (+0.95% for the week).

On Friday, bank stocks in Europe fell sharply, with Deutsche Bank and UBS Group suffering the most due to fears that problems in the banking sector may persist. Investor attention has recently focused on the German giant Deutsche Bank. Its shares have lost more than a quarter of their value this month, including an 8.5% drop on Friday, and the cost of default protection on its bonds has risen sharply. German Chancellor Olaf Scholz said Friday at a news conference in Brussels that Deutsche Bank “has carefully reorganized and modernized its business model and is a very profitable bank,” adding that there was no reason to speculate about its future. But that hasn’t reassured investors. Kristalina Georgieva, head of the International Monetary Fund, said Sunday that risks to financial stability had risen and urged continued vigilance.

The shadow banking sector is a “weak point in the financial system” and could trigger the next financial crisis, European Central Bank (ECB) vice president Luis de Guindos has warned. In his opinion, the European banking sector is “reliable and stable,” but the non-banking sector “could become a source of problems for the entire financial sector.

Ukraine demands an extraordinary meeting of the UN Security Council over Putin’s intentions to deploy tactical nuclear weapons on the territory of Belarus. NATO criticizes Putin for his “dangerous and irresponsible” nuclear rhetoric. While the US downplayed concerns about Putin’s statement, NATO said the Russian president’s pledge of nuclear non-proliferation was far from the truth.

The consequences of banks weakening their role in commodities could be far-reaching and negative. How are banks related to oil? No barrel of crude oil can move without financing or liquidity provided by banks. Banks are market makers for all commodities, not just oil, because they bring buyers and sellers together. Therefore, independent oil and gas producers may have limited ability to hedge price risks associated with investments and inventories. A possible recession in the United States, sanctions against Russia over the invasion of Ukraine, the release of strategic reserves, and strikes at refineries in France are all shaking up oil markets. For the growth of oil prices now, it is necessary for the situation in the banking sector to calm down, and demand in China began to recover on the threshold of summer.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) gained 0.56% for the week, China’s FTSE China A50 (CHA50) jumped by 2.18% for the week, Hong Kong’s Hang Seng (HK50) ended the week up by 2.91%, India’s NIFTY 50 (IND50) decreased by 0.07%, and Australia’s S&P/ASX 200 (AU200) ended the week down by 0.56%. Most Asian stocks fell Monday amid renewed fears of new bank defaults in the US and Europe, with Chinese markets falling the most as weak results drove oil and gas stocks lower.

In the commodities market, futures on cocoa (+5.19%), orange juice (+4.7%), copper (+4.64%), silver (+4.02%), WTI oil (+3.39%), gasoline (+3.17%) and Brent (+2.78%) showed the biggest gains last week. Futures on lumber (-8.46%), natural gas (-6.72%), soybeans (-3.18%), and wheat (-2.89%) showed the biggest drop.

S&P 500 (F) (US500) 3,970.99 +22.27 (+0.56%)

Dow Jones (US30)32,237.53 +132.28 (+0.41%)

DAX (DE40) 14,957.23 −253.16 (−1.66%)

FTSE 100 (UK100) 7,405.45 −94.15 (−1.26%)

USD Index 103.12 +0.58 (+0.57%)

• – German Ifo Business Climate (m/m) at 11:00 (GMT+2);
• – UK BoE Gov Bailey’s Speech at 20:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By George Prior

Heightening volatility in major stock markets around the world, triggered by concerns of the global banking system, will be used by investors as a buying opportunity, affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The observation from deVere Group’s Nigel Green come as US stock futures fell on Friday, the pan-European Stoxx 600 index was down 1.5% by mid-morning, following a mixed session in Asia-Pacific markets.

He says: “Deutsche Bank shares have dropped for a third consecutive day – they’re now down 13% – and have now lost more than a fifth of their value so far this month.

“The emergency rescue of Credit Suisse by UBS, in the wake of the collapse of the US based Silicon Valley Bank and Signature Banks, has triggered a wave of contagion fears among investors, which was further exacerbated by more monetary policy tightening from the US Federal Reserve on Wednesday and the Bank of England on Thursday.”

The deVere CEO continues: “The growing sense of unease about the global banking system is heightening volatility in stock markets around the world.

“Savvy investors will be using this turbulence as a buying opportunity because the current creeping fearful sentiment doesn’t just hit the banking sector, it becomes more generalised.

“This brings down the prices of other high-quality stocks and investors seize on this to top-up their portfolios at lower entry points.

“Clearly, they won’t want to miss out on some key opportunities, but they must also avoid the ‘buy everything’ mindset.”

Whilst inflation remains a major headwind, Nigel Green explains, investors should “remain alive to other metrics” in investment decision-making.

When costs are going up, investors should increasingly be looking at a company’s ability to maintain margin.

“Investors should be paying close attention to margin because it can indicate how well a company is managing costs and competing in its industry.

“It can also impact a corporation’s ability to invest in growth opportunities or pay dividends” to shareholders.

“A good fund manager will help investors seek out the opportunities and mitigate potential risks as and when they are presented to generate and build their wealth.”

The deVere CEO concludes: “As concerns about the stability of banks persist, we expect further and intensifying market volatility.  This will be used, as it always is, by investors to bolster their investment portfolios.

“This can prove to be an extremely effective strategy, but advice should be sought from a quality fund manager.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of offices across the world, over 80,000 clients and $12bn under advisement.

By JustMarkets

At the close of the US stock market yesterday, the Dow Jones Index (US30) increased by 0.23%, and the S&P 500 Index (US500) added 0.30%. Technology Index NASDAQ (US100) gained 1.01%. Investors are still trying to understand why the Fed keeps raising rates when risks in the financial sector have risen. According to a new batch of published Fed projections, interest rates will peak this year at 5.1%, which implies another rate hike. The Fed Funds rate futures now indicate mixed expectations for the next FOMC meeting on May 3. They imply the likelihood of either a pause in rate hikes or another quarter percentage point increase.

Elon Musk commented on the Federal Reserve’s (Fed) statement on the reliability of the US banking industry. Musk assessed the state of the US banking system with the words: “It can’t get any worse.” Earlier, on March 22, the Fed said that the US banking system is reliable and stable. But the charts show differently. The decline in the US banking sector continues. The KBW Commercial Banks Index and SPDR S&P Regional Banking ETF KRE continue to decline for the second straight day. The decline in banks came even after Treasury Secretary Janet Yellen said Thursday that the government is willing to step in again if necessary to ensure the stability of regional banks.

TikTok and ByteDance could potentially be banned from the United States. TikTok CEO Shaw Zee Chu is on Capitol Hill to testify before Congress as lawmakers mull whether to ban the app amid concerns over the app’s data privacy and possible ties to the Chinese Communist Party.

Europe’s stock indices traded flat yesterday on Wednesday. German DAX (DE30) decreased by 0.04%. French CAC 40 (FR40) gained 0.11%, Spanish IBEX 35 (ES35) lost 0.44%, and British FTSE 100 (UK100) closed yesterday with a 0.89% loss.

Norges Bank raised rates yesterday by 25 basis points to 3.0%. Although domestic inflation is falling faster than previously expected thanks to lower energy prices, the central bank pointed to rising wages and a weak currency as drivers of further price pressures and eventually promised to raise rates again at its next meeting in May. In a new set of economic forecasts, Norges Bank reported at least two more rate hikes before peaking at 3.50% this summer.

The Bank of England raised its interest rate by 25 basis points Thursday to 4.25%, in line with expectations, and said further tightening would be required if there was evidence of more sustained price pressures. According to the Bank of England, fiscal support for the economy will add 0.3% to GDP.

The Swiss National Bank (SNB) also raised its discount rate by 50 basis points to 1.5%. The Central Bank seeks to balance its fight against inflation with fears of financial market turmoil. Inflation in Switzerland stands at 3.4%. The SNB also said that the measures announced over the weekend by the authorities against Credit Suisse “stopped the crisis.” Together with the Swiss government and financial market regulator FINMA, the Swiss National Bank (SNB) helped organize an emergency takeover of Credit Suisse (CS) by UBS (UBS) on Sunday to prevent the collapse of the country’s second-largest bank.

Gold returned to the $2,000 mark on Thursday. Yields on 2-year Treasuries fell again yesterday, indicating the debt market is unsure about the likelihood of another rate hike. Gold has an inverse correlation to government bond yields, so while the dollar index and yields are down, precious metal prices are rising.

Asian markets traded yesterday without a single trend. Japan’s Nikkei 225 (JP225) declined 0.17%, China’s FTSE China A50 (CHA50) gained 0.68%, Hong Kong’s Hang Seng (HK50) jumped by 2.34%, India’s NIFTY 50 (IND50) fell by 0.44% lower, while Australian S&P/ASX 200 (AU200) was 0.67% lower on the day.

In Japan, consumer price inflation slowed in February for the first time in 13 months, mostly due to the government energy subsidy program. Consumer prices fell from 4.3% to 3.3% y/y. Some Bank of Japan policymakers noted the possibility that inflation could exceed initial expectations as price and wage growth showed signs of expansion.

S&P 500 (F) (US500) 3,948.72 +11.75 (+0.30%)

Dow Jones (US30)32,105.25 +75.14 (+0.23%)

DAX (DE40) 15,210.39 −5.80 (−0.038%)

FTSE 100 (UK100) 7,499.60 −67.24 (−0.89%)

USD Index 102.54 +0.20 (+0.19%)

• – Australia Manufacturing PMI (m/m) at 00:00 (GMT+2);
• – Australia Services PMI (m/m) at 00:00 (GMT+2);
• – Japan National Core CPI (m/m) at 01:30 (GMT+2);
• – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
• – Japan Services PMI (m/m) at 02:30 (GMT+2);
• – German Manufacturing PMI (m/m) at 10:30 (GMT+2);
• – German Services PMI (m/m) at 10:30 (GMT+2);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
• – UK Services PMI (m/m) at 11:30 (GMT+2);
• – Canada Retail Sales (m/m) at 14:30 (GMT+2);
• – US Durable Goods Orders (m/m) at 14:30 (GMT+2);
• – US Manufacturing PMI (m/m) at 15:45 (GMT+2);
• – US Services PMI (m/m) at 15:45 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

“The pressure on banks will rise”

By Elliott Wave International

The phrase “Everything Bust” means a bust in just about every financial risk-asset of which you can think, as well as the economy and, I dare say, the financial system itself.

Indeed, in a section titled “The Everything Bust Is on The Way,” the December Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, noted:

The pressure on banks will rise as the economy heads south.

And, now, we have these headlines:

• Silicon Valley Bank Fails After Run on Deposits (The New York Times, March 10)
• Crypto-focused bank Silvergate is shutting operations and liquidating after market meltdown (CNBC, March 8)

Silicon Valley’s collapse was the biggest bank failure since Washington Mutual in 2008 and the second largest bank failure in U.S. history.

Many of those on Wall Street blamed the bank failures for triple-digit declines in the Dow Industrials on the day the news came out. However, the real “bust” in the Dow Industrials and S&P 500 began a year earlier, in January 2022. It reflected a downturn in a social mood; today’s bank failures have the same roots that stretch back months and months. And since social mood is showing no signs of improvement, it’s likely not over.

The “Everything Bust” is on — in stocks, real estate, bonds, the world of crypto, SPACs (a.k.a. special purpose acquisition companies) and elsewhere in the world of finance, including the subprime auto market.

This chart and commentary are from the March Global Market Perspective:

The percentage of subprime auto borrowers who are at least 60 days late on payments surged to 6.05% in December, more than double the seven-year low of 2.58% recorded in April 2021, and eclipsing the peak reading of 5.7% during the Great Recession of December 2007 to June 2009.

As a March 10 New York Post headline said:

Silicon Valley Bank meltdown sparks contagion fears: ‘We found our Enron’

Whether you want to call it “contagion fears” or the manifestation of an increasingly fearful mood, don’t be surprised if more bank failures appear on the horizon sooner rather than later.

Also, don’t be surprised if more triple-digit declines occur with the Dow Industrials.

The Elliott wave pattern of this senior U.S. index is revealing what very well may be next for U.S. stocks.

If you’re unfamiliar with Elliott wave analysis, or simply need a refresher, read Frost and Prechter’s Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the book:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market’s position within the behavioral continuum and therefore about its probable ensuing path. The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market’s general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable. Many areas of mass human activity display the Wave Principle, but it is most popularly used in the stock market.

If you’d like to read the entire online version of this Wall Street classic, you may do so for free once you become a member of Club EWI, the world’s largest Elliott wave educational community (around 500,000 worldwide members).

A Club EWI membership is also free and members enjoy complimentary access to a range of Elliott wave resources on investing and trading.

Join Club EWI now by following this link: Elliott Wave Principle: Key to Market Behavior — get free and instant access.

By ForexTime

This week’s highly-awaited major central bank decisions have come and gone.

And all 3 major central banks largely adhered to market expectations for the respective rate hikes.

After all, policymakers were certainly aware that market nerves are still raw after enduring the financial turmoil on both sides of the Atlantic, engulfing names like Silicon Valley Bank and Credit Suisse.

It wouldn’t have been in their best interests to spook markets further.

Hence, the following rate decisions resulted in relatively subdued volatility in FX markets.

Before we recap the various central bank decisions, first a reminder:

• FX markets tend to “reward” and strengthen the currency of the central bank that can push its own interest rates higher (relative to other economies)
• However, as we’ve seen of late, a currency’s movements also can be driven by market sentiment surrounding its economic performance. When confidence is weak, that tends to translate into currency weakness.
  Hence, no surprise that the US dollar and the Swiss Franc were roiled amid the sudden chaos engulfing Silicon Valley Bank and Credit Suisse over the past two weeks.

Now time for the recap, starting with the most recent:

• The Bank of England (BOE) hiked by 25 basis points (bps).

Just an hour ago, the BOE was also able to sound a hawkish note and signal more UK rate hikes ahead, while forecasting that the UK economy will dodge a recession this year.

After all, the UK January consumer price index (used to measure headline inflation) that was released yesterday (Wednesday, March 22nd) showed that inflation remains stubbornly in double-digit territory. The CPI climbed by 10.4% in January 2023, compared to January 2022 (year-on-year).

Such an outlook by the central bank helped GBPUSD sustain recent gains.

• The Swiss National Bank (SNB) hiked by 50 bps.

Also today (Thursday, March 23rd), the SNB prioritised its fight against inflation and suggested that more rate hikes are incoming.

The SNB issued such hawkish signals despite the recent financial turmoil surrounding Credit Suisse.

Still, today’s rate hike was unable to prevent the Swiss Franc from weakening against its G10 peers.

Despite the CHF strength as the immediate reaction to the lager 50bps hike by the SNB (relative to the Fed and BOE), the Swiss Franc was unable to hold on to those gains against the US dollar.

• The US Federal Reserve (Fed) hiked by 25 bps.

On Wednesday, Fed Chair Jerome Powell insisted that policymakers remain focused on conquering inflation with more rate hikes.

However, markets were willing to challenge Powell’s narrative!

Markets now pricing in a 70% chance that the Fed would actually CUT interest rates in July 2023!

Such dovish repricing pushed the US dollar index down to its lowest levels since early February, and the greenback is still evidently struggling today.

What’s next for FX markets?

Investors and traders will still be busy deciphering the next moves by these major central bankers.

And such outlooks will be informed via the regular menu of tier-1 economic data out (think inflation and jobs data)of these major economies.

Of course, markets will also be keeping a close eye on signs of further instability in the US and European banking sectors.

If the contagion spreads and sends the global financial system into yet another crisis, that would roil global financial markets.

Ultimately, as mentioned earlier, markets are likely to weaken the currency that’s closest to ground zero of the financial turmoil, as the US Dollar and the Swiss Franc experienced in recent weeks.

On the flip side, should investors and traders make a run for the hills, safe havens such as gold and the Japanese Yen should ultimately benefit.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

The debt bomb implodes: Expect recession and deflation;

By Elliott Wave International

Many pundits have expressed worry about the ramifications of global debt — and rightly so. As the Wall Street Journal noted toward the end of 2022:

The world has amassed $290 trillion of debt and it’s getting more expensive to pay for it.

In the U.S. alone, the cost of servicing the national debt is expected to skyrocket over the next decade (Fox News, Feb. 27):

Interest payments on the national debt to reach $1.4 trillion annually in 2033: CBO

There’s also the issue of household debt in the U.S. That debt bomb is already in the process of imploding. Here’s a chart and commentary from our March Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets:

A rare shift in the mindset of consumers started in March 2020, when Real Total Consumer Credit began to decline. Since August 1982 … the growth in U.S. consumer debt has been almost straight up. But there were two prior episodes in which American consumers’ otherwise insatiable appetite for debt dissipated: from December 1989 to October 1992 and from December 2008 to November 2011. Both periods encompassed economic recessions. It happened again starting in March 2020, but this time, real consumer debt failed to recover to new highs with the economy.

Another important point to make is that the balance sheets of the European Central Bank, the Bank of England and the Federal Reserve have been deflating — and so has another key measure.

This chart and commentary are also from our March Global Market Perspective:

More deflation evidence comes in the form of overall money supply in the U.S. … The chart shows the annualized percentage change in M2 since 1981. Apart from a very brief (one week!) foray into negative territory in 1995, money supply in the U.S. has been inflating for at least 40 years. Now, though, money supply is deflating at a current annualized clip of over 2%. This historic and now twelve-week-long contraction in money on this basis looks like it is becoming embedded.

It’s also a good idea to keep an eye on major worldwide stock indexes. History shows that global economies tend to follow global stock indexes. In other words, when stock markets tank, economies generally follow and vice versa.

You can get a handle on the main trends of global stock indexes by using the Elliott wave method.

If you’re unfamiliar with Elliott wave analysis, read Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the book:

In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4. The two interruptions are apparently a requisite for overall directional movement to occur.

[R.N.] Elliott noted three consistent aspects of the five-wave form. They are: Wave 2 never moves beyond the start of wave 1; wave 3 is never the shortest wave; wave 4 never enters the price territory of wave 1.

[Elliott] did not specifically say that there is only one overriding form, the “five-wave” pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.

If you’d like to read the entire online version of the book for free, you may do so by joining Club EWI, the world’s largest Elliott wave educational community.

A Club EWI membership is also free and members enjoy free access to a wealth of Elliott wave resources on investing and trading.

Join Club EWI now by following this link: Elliott Wave Principle: Key to Market Behavior — get free and instant access.

By George Prior

The US Federal Reserve’s ‘big decision’ on interest rates was not really a decision at all, says the CEO of one of the world’s largest independent financial advisory organizations, after the US central bank announced a quarter point hike on Wednesday.

Nigel Green of deVere Group’s comments follow Fed Chair Jerome Powell confirming a widely expected 25-basis point hike at the conclusion of a two-day monetary policy meeting.

The deVere CEO says: “Expectations on what would be the outcome of the meeting have been shifting throughout the month.

“After Powell told a Senate committee earlier in March that inflation was still too high, expectations went from 25 basis points to 50 basis points.

“But then, days later, with the collapse of Silicon Valley Bank and Signature Banks, sparking fears about a banking crisis and a potentially global negative impact, some commentators expected no rate increase in March based on the news.

“The Fed’s dilemma of taming stubbornly high inflation without setting light to the banking system and causing financial instability has been dubbed as ‘The Big Decision.’

“However, we are of the opinion there was not rally a Big Decision here. If they did more than 25bps, it could trigger more instability and to do nothing could be seen as negligent.”

He added that the Fed must proceed with caution, stating that mistakes of the past are coming back to haunt the US central bank.

“The Fed didn’t act quickly enough to tame inflation from the beginning. They resisted raising interest rates from near-zero levels for most of 2021, even as prices began shooting up due to pandemic-related supply chain snarls, Covid outbreaks and a persistent labour shortage, amongst other issues,” he notes. “This all leads to sky-high inflation – and especially wage inflation.”

It would seem that the Fed hasn’t learned the lessons from the 1980s.

“During much of the 1970s, the US central bank refused to roll out rate hikes, probably due to political pressure from leaders unwilling to allow higher unemployment on their watch.

“Of course, this made workers keep asking for ever higher salaries, which forced businesses to keep increasing prices to compensate, and which led to the infamous 1980’s wage-price spiral and the recession.”

In a media statement on Monday, Nigel Green said that investors are now ready to build their investment portfolios with new money amid a growing consensus that looser monetary policies from the Fed and other major central banks are coming which will boost financial markets.

It came after the Federal Reserve, the Bank of England, Bank of Japan, Bank of Canada, the European Central Bank and Swiss National Bank all vowed to keep credit flowing in the serious issues affecting the banking sector, showing that they are willing to do whatever it takes to avert a crash.

“Investors are taking this as a sign that central banks will now ease off interest rate hikes. Looser monetary policies will trigger a surge in financial markets.

“Not wanting to miss out on the next rally, clients are now telling our consultants around the world that they want to build-up their investment portfolios with new money,” he said.

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of offices across the world, over 80,000 clients and $12bn under advisement.