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Monday 29th 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 29th of November. Markets reacted to news of the new "variant of concern". Markets moved lower, Bond yields drifted, Sterling closed lower, oil prices rolled over and Cryptos crashed.
It all looks a bit of an over reaction this morning. Markets are looking for a reset in the U.S. and Japan. Tech stocks look vulnerable but this is not the moment ...
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 3.2% ... Overvaluation +7.5%
Our index basket closed down this week -3.2%. Markets reacted to news of the Omicron variant. Biggest falls were in Germany, France and Hong Kong. US stocks were down with Nasdaq leading the way. Shanghai was unmoved by the action.
Our over valuation index fell to +7.5% for the basket as a whole. The American components leading the charge with a 15.5% over rating. The Nasdaq trades 19% above bench. FTSE the best value on the block, with some reversal of last week's losses likely today. Too early to worry about the new covid variant of concern. Beware our Nietzsche guideline "Any explanation is better than none". Markets are looking for a reset, now mainly in the U.S. and Japan. This is not the moment for the big move...
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| | Bond Market Sentinel ... US Ten Year Yield 1.53 ...
US ten year bond yields moved down 1 points to close at 1.53. In the UK ten year gilts closed down 5 points to close at 0.84. So much for fears of inflation in forward markets.
In Japan rates were unmoved, euro rates moved down 1 point. Next the test of 1.80 in the US and 1.25 in the UK? That may have to wait for later in 2022. Don't expect a rise in base rates before Christmas. We model UK rates at 1.00% by the end of 2022, with US rates at 0.5% and Euro rates unchanged according to the ECB. Coming soon, Our Friday Forward Guidance, we provide a scenario forecast for base rates and bond yields in the US, UK and Europe every week.
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| | Exchange Rates ... Sterling down to $1.33 ...
Sterling closed down against the dollar at $1.3319 from 1.3477 but up against the Euro at €1.1886 from €1.1876. Markets reacted to Covid news, thoughts of a rate rise in December long forgotten.
The Pound is trading at $1.351 this morning against the Dollar and €1.18 against the Euro. Last week's moves looks overdone. $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 down 3.8% ...
Our Empires of the Cloud Fund was down 3.8% this week. All were down as sentiment moved against tech and growth stocks.
We mark our overall gain from the fund at 430% since 2016. Our valuation index suggests a 17% over reach. A combined market cap of $9.7 trillion and an average PE of 36.9 suggests a period of consolidation should follow at best.
Technically, all look vulnerable to a 20% reset..
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Crypto Wallet down -7.7% ... Bad week for Bitcoin fans. Our wallet was down 7.7% with a big fall in Dogecoin, Ripple and Litecoin. Ethereum the only positive in the pack. There appears to be some fundamental substance to Ethereum action.
Bitcoin closed down to finish at $54,500. 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 traders may rally round to retest $60,000 but support at $50,000 may well be tested first.
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| | Oil Brent Crude trades lower ... $72.92 ...
Oil
prices Brent Crude closed lower at $72.92 last week. Trading at $76.24 this morning, last weeks sell off was an over raction.
US oil prices WTI trade at at $71.77 as we press send. The US oil rig count moved to 467 last week from 461. The US cavalry is coming. Biden's stock release has kicked the OPEC cartel into retaliatory action. We expected the pull below $80 dollars to hold, $75.00 to $80.00 may be the range for the Brent Crude Winter trade. The EIA forecast of $72 dollar oil through 2022, a tad optimistic.
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| | That's all for this week's Monday Morning Markets, Detailed Charts are available to Premium Subscribers, plus you get access to Our NEW Friday Forward Guidance ... Sign Up Here to make sure you continue to receive our ...
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There has never been a better time to be better informed! Have a great week ...
John
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© 2021 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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