The Bank of Japan ended the world's last negative interest rate policy. The yen fell after the BoJ's first rate hike in 17 years, which was widely expected either at today's rate decision or in April, as BoJ Governor Kazuo Ueda struck a rather dovish tone, hinting at a prolonged accommodative stance. This is a very dovish rate hike and the markets have taken it as such.
On the other hand, the Fed is expected to scale back hopes of rate cuts following the recent inflation reports, which were however heavily influenced (in my view distorted) by a rise in housing costs.
Ahead of tomorrow's Fed rate decision, we see further USD strength. I believe that the USD will suspend the normalization process for longer as the Fed actually has little reason to cut rates. I still expect the Fed to make it clear that conditions for rate cuts are improving, so I don't expect an overly hawkish Fed tomorrow. Investors will focus primarily on the Fed's projections – the dot plot – to gauge how many rate cuts policymakers are likely to make this year. I do not expect any major changes and believe that the market is attaching too much importance to the dot plot. The Fed will remain data dependent and act accordingly.
In Europe, investor confidence in the German economic outlook rose to its highest level in more than two years, driven by expectations that the ECB will cut interest rates in the coming months and that demand – particularly from China – will improve.
We generally see pessimism rising among equity investors and expectations of a sharp correction – I see strong signs that the rally is exhausted and also signs of a healthy correction (5% to 10% maximum), but I don't expect panic selling. The US economy is too strong and we continue to see good conditions for equities.
For today, we expect equity prices to rebound somewhat. However, investors will remain cautious ahead of the Fed's interest rate decision tomorrow – we could see further selling in the second half of US trading and tomorrow. Energy and more defensive sectors (e.g. health) will outperform over the next 24-48 hours.
Gold prices have retreated somewhat, also due to the recent rise in yields. The higher yields continue to weigh on the yellow precious metal – but gold is very attractive, especially in the medium term. While buying meaningful dips is still the right strategy for gold, I would advise Bitcoin buyers to be more cautious now, as the risk of heavy profit-taking is greater. We continue to see rising oil prices – another sign that commodity and oil traders are expecting an improvement in the global economy and therefore demand.
👁 ROB'S MARKET OVERVIEW:
March 18, 2024
🌐/🇺🇸 Global Markets ↘️/↗️/↘️ (US stocks to rebound first – then selling to return in second half of US trading)
Cyclical / Luxury Stocks ↘️/↗️/↘️
Tech/Growth Stocks ↘️/↗️/↘️
Financial Stocks ↘️/↗️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ↘️/↗️ (remains bullish)
Materials Stocks ↗️/➡️
💱 Forex
USD ↗️ (will remain in demand ahead of Fed rate decision)
CAD ➡️/↗️
EUR, GBP ➡️
AUD ↘️/↗️ (oversold, will rebound)
JPY ↘️/➡️ (JPY oversold for today; dovish tone of BoJ provides further downside)
CHF ➡️/↘️
⚒ Commodity Markets ↕️/↗️
Oil prices ➡️/↗️ (oil remains bullish)
Natural Gas prices ↗️
Metal prices ↗️/↕️
Gold ➡️/↗️ (remains overall bullish, may see slight headwinds on concerns about hawkish Fed)
⚡️Cryptos ↕️/↘️ (Very volatile; more panic profit taking waves likely)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
