We see markets increasingly turning away from fundamentals. Optimistic investors in the US and a strong performance from big tech – supported by the immense revenue potential of AI – led to a recovery rally in August and record performance in H1/2023. We are seeing more and more red flags that are making it incredibly difficult to sustain the rally.
Another round of disappointing German data shows that the German, Eurozone and UK economies continue to contract, while consumer prices remain high and show little sign of falling quickly despite falling consumer spending = typical stagflation. Higher energy prices and the prospect that the oil supply deficit will remain until the end of 2023 further cloud the outlook.
Hopes of an end to interest rate hikes helped markets rally in 2023, but the impact of higher rates is only now beginning to have a huge impact. We also see that the engine of the global economy, which has been China for the past two decades, continues to sputter.
Optimism that China can counter the ongoing slowdown in growth with stimulus measures is fading, even though real estate developers in China jumped significantly today on the back of further support from Beijing.
We are hearing more voices from Japanese officials that JPY weakness should be countered – a change in Japanese monetary policy could also pull money from international markets – but is long overdue.
The USD remains supported – in part by expectations that oil prices will continue to rise, which means more demand for petrodollars.
We expect a very difficult month for equities. A slump in equities in Europe and a fizzling recovery in China could lead to a rude awakening on Wall Street. We see a rally on very shaky ground. Despite optimistic investment banks and analysts, we see macroeconomic headwinds and signs of a further slowdown making it very difficult for stocks to maintain their 2023 gains.
👁 ROB'S MARKET OVERVIEW:
September 06, 2023
🇺🇸 US Markets ↕️/↘️
Cyclical Stocks ↕️/↘️
Tech/Growth Stocks ↕️/↘️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️/↗️ (defensive stocks underperforming yesterday which made little sense fundamentally – likely outperforming today)
Energy Stocks ↘️/↕️/↗️ (slight headwinds pre-market; energy sector to outperform in H2)
Materials Stocks ↗️/➡️/↘️ (optimism about China's property sector to fade again, weighing on materials sector)
JPY ➡️/↗️ (BoJ intervention increasingly likely)
EUR ↗️/➡️/↘️ (EUR with rebound attempt, selling to return)
USD ➡️ (USD to remain supported, but short-term slightly overbought)
CHF, CAD ➡️
GBP, AUD ➡️/↘️ (worsening risk sentiment)
⚒ Commodity Markets ↕️
Oil prices ↘️/↕️/↗️ (oil prices to stabilize; oil remains bullish)
Natural Gas prices ↕️/↘️
Metal prices ↗️/↕️/↘️ (optimism boost about China's property sector to fade again)
Precious Metal prices ➡️/↗️ (finding a bottom, more safe haven demand)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)