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Monday 4th October 2021
Hi Friend,
TSE Monday Morning Markets ...
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| | The Saturday Economist Monday Morning Markets ...
This is our Monday Morning Markets Update for the 4th October. The detailed chart books are available with details of our "Market Value Measures". US stocks remain over valued, fair value in equities lies elsewhere ...
"Cash is Trash, Bonds are Garbage, Dollar Equities Are Overvalued" ... Be careful out there ...
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| | Markets closed down -1.8% ...
Our index basket closed down this week. Fears for Evergrande and systemic disruption in China pushed the Hang Seng and Shanghai indices lower. Over extension in Japan and India pushed the Nikkei Index down by almost 5% and the BSE by 2%.
In Europe the FTSE held ground assisted by Sterling weakness. The CAC and DAX edged lower.
In the US the DOW, SPX and Nasdaq all moved lower. Nasdaq, the most overvalued index leading the way, down by 3%. An adjustment part of a healthy correction? The implicit overvaluation is 10% across the US Three, down by 3% in the month of September. Fair value to be found in Europe, further caution in Asia warranted.
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| | Bond Market Sentinel ... UK Ten Year 1.00 ...
US ten year bond yields moved higher again this week, closing at 1.48 from 1.45. A test of the 1.50 proved a little too much mid week. UK bond yields moved higher to 1.00 from 0.94. Further pressure will push yields higher and capital prices lower.
In Japan ten year bond yields were down to 0.05. European bond rates were unchanged at -0.23. The only way for yields appears to be up, with an inherent capital loss in the process.
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| | Exchange Rates ... Sterling Down $1.348
Sterling closed down against the dollar at $1.3484 and down against the Euro at €1.1635. The cross rate Euro Dollar moved lower at $1.1614.
A perceived slow down in the UK economy suggested the Bank would be slower to act to raise rates. Strong talk from the Fed suggested a rate rise could occur ahead of the rest. Slim chance!
The move against Sterling appears premature. The Pound is trading at $1.3583 this morning, up against the Dollar and the Euro, €1.1697.
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| | Empires of the Cloud Trade Lower -3.5%.
Our Empires of the Cloud Fund traded lower this week. The "AI" Five closed down -3.5% led by Amazon and Google. The average over valuation we place at 10% with further correction possible. Look to the East and Alibaba for a contrarian play.
The market cap of the US group closed down to $9.0 trillion, just Apple and Microsoft remaining in the Two Trillion Dollar Club. Facebook out of the $1 trillion club with the latest moves. The average PE moved to 35.21, Amazon at 57.22 sets the pace.
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| | Good week for Crypto ... Up 6.1% ...
Good week for Crypto fans. Our crypto wallet moved up 6% led by Bitcoin up almost 9% closing at $47,594. The test of $40,000 will have to wait for now. Litecoin the best performer up by 12%. Ethereum the laggard off 2%.
The crypto club was relieved when Fed Chair, Jerome Powell said he had no intentions of banning Bitcoin and the like. The Fed happy to let the playtime continue for the moment. The excitement will lead to a reassessment of the over extension.
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| | Oil Prices Moving Higher ...
Oil
prices Brent Crude closed up at $78.77 last week. Trading at $79.45 this morning, both oil and gas prices are moving higher again.
We had expected oil to trade between $65 - $70 in the
second half as the long bets unwind. The current pattern will upset our inflation outlook. Inflation CPI basis hit 3.2% in August.
The Bank expects inflation to hit 4% in the final quarter but the risk is to the upside ... $75.00 to $80.00 may be the range for the Brent Crude Autumn trade maintaining the pressure on input costs. Traders will push higher but OPEC is expected to open the valves to relieve the pressure somewhat ...
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| That's all for this week's Monday Morning Markets have a great week ahead ...
JKA
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© 2021 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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