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Monday 22nd November 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 22nd November. Sterling moved higher. Bond yields drifted. Oil Brent Crude closed below $80 dollars. Our crypto wallet dropped 7% as Bitcoin failed to hold the $60,000 level. In Equities, our index basket was down -0.3%. Nasdaq the best performer as tech stocks including our Empires of the Cloud fund starred.
Following comments from How Pill at the Bank, markets are talking once again about a rate rise next month. We model in a rate rise to 1.00% by the end of next year. The move is expected to begin before Easter, not before Christmas!
Top line, "Cash is Trash, (Jamie Dimon), Bonds are Garbage ( Bill Gross), Equities Are Overvalued (Everyman), Bitcoin is worthless (Jamie Dimon), Most NFTs are junk (John Hargrave)" ... When it comes to understanding market moves, "Any explanation is better than none" (Nietzsche). Be careful out there ...
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| | Markets down 0.3% ... Overvaluation +11.1%
Our index basket closed down this week -0.3%. U.S. stocks were mixed. Over the last two months, the Dow has peaked, the S&P traded flat, the Nasdaq pushed higher as tech stocks made gains.
In Asia, Hang Seng moved lower as Nikkei and Shanghai were up slightly. Bombay suffered a reversal from last week's gains.
Our over valuation index move to +11.1% for the basket as a whole. The American components leading the charge with a 18.6% over rating. The Nasdaq trades 24% above bench. Shanghai the best value in our world series. The FTSE offers best value in our European trio.
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| | Bond Market Sentinel ... US Ten Year Yield 1.54 ...
US ten year bond yields moved down 2 points to close at 1.54. In the UK markets ten year gilts closed down 3 points to close at 0.89. So much for fears of inflation in forward markets.
In Japan rates moved down 1 basis point, euro rates moved down 9 points. Christine Lagarde suggested no Euro base rate hikes in 2022!
Next the test of 1.80 in the US and 1.25 in the UK? That may have to wait for the Spring of 2022. Don't expect a rise in base rates before Christmas. We model UK rates at 1.00% by the end of 2022.
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| | Exchange Rates ... Sterling up at $1.3477 ...
Sterling closed up against the dollar at $1.3477 from 1.3392 and up against the Euro at €1.1876 from €1.1676. Markets reacted to the suggestion the Bank may raise rates in December. Some chance!
The Pound is trading at $1.3435 this morning against the Dollar and €1.19 against the Euro. $1.38 may be the extent of the Sterling rally. Love those dollars ... make the switch on the rally ... average in along the way ...
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| | Empires of the Cloud up 2.9% ...
Our Empires of the Cloud Fund was up 2.9% this week. Apple the big mover up 7%. Markets reacted well to the idea of an Apple Car. Apple regained highest cap position ahead of Facebook. Amazon the other big mover as Google flat lined. We mark our overall gain from the fund at 446% since 2016.
Our valuation index suggests a near 22% over reach. A combined market cap of $10.0 trillion and an average PE of 38.5 suggests a period of consolidation should follow at best.
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Crypto Wallet down 6.9% ... Bad week for Bitcoin fans.The lead crypto closed down 8% at $58,000. Ethereum the only positive up 1.3%. Dogecoin, Ripple and Litecoin were down 9% overall.
Where next for Bitcoin? The chart suggests a big downside to $50,000 or even $40,000 now $60,000 has been breached. Those big Ape traders may rally round to test $60,000 once again. Listening to Cathie Woods last week, Ark still model in the rise to $500,000 over the medium term ... that must be a spiritual medium term ...
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| | Oil Brent Crude trades lower ... $78.99 ...
Oil
prices Brent Crude closed lower at $78.99 last week. Trading at $78.79 this morning, we expect prices to trend lower.
US oil prices WTI trade at $75.96 as we press send. The US oil rig count moved to 461 last week from 454. The cavalry is coming. The rig count should be double the level for an $80 dollar trade.
We expected the pull below $80 dollars, $75.00 to $80.00 may be the range for the Brent Crude Winter trade.
Note to file: Shipping delays are set to improve. There were 71 container ships anchored off the west coast ports of Los Angeles and Long Beach this week compared to 86 at peak at the start of the month. Before the pandemic it was unusual for any to stand off shore. Backlogs are expected to clear in early 2022!
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| | That's all for this week's Monday Morning Markets, have a great week ahead ...
John
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© 2021 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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