2022/10/17 (090) Column

„What Has US Wall Street
Already Priced In?“


Anyone who is already investing again is showing courage.
Whether in terms of individual exchange rates, certain yield curves, individual stocks and/or commodities, 2022 was and is consistently weak. Including a fundamentally negative mood, due to the Russia/Ukraine war.

Have all risks been “priced in” by now?
Professional investment strategists are (still quietly) giving hope and are at least discussing something like a bottoming out of the US stock markets on US WallStreet. Which you can imagine with a little imagination. Apart from my personal unshakable long-term optimism, I remain skeptical for the second half of 2002. Will not and can not answer my question at this point. Because nobody can know how the price-relevant influences on the price developments, both on the exchange rates and on the yield curve, as well as stock markets, let alone individual stocks and/or individual commodities, will actually develop further.

For me, the unloved, horrible topic that no one secretly wants to deal with is and/or will remain, but must, is still the Russia/ikraine-War. I grudgingly join every fellow human beings, editors, analysts still to report about it. And I hope to be able to contribute my constructive building block. So that everyone involved can sit down and agree; it doesn’t have to be a handshake. TO ORGANIZE CIVILIZED PEACE IN UKRAINE! To organize preace between this both nations with a bilateral contract that preserves the civilized trade relationship between both again is sufficient for the beginning! Or? Until then we still will have to deal with this scenario…
DEVISE 2 DAY 48h
– My Last Thoughts About Market Price Actions

In the US, the week will be dominated by earnings reports, speeches by several Fed officials, and housing data. Investors will be also monitoring financial markets in the UK following the government U-turn on taxcuts. In China, the 20th National Congress of the Chinese Communist Party will take place and Q3 GDP growth, alongside industrial production and retail sales will be released. Also, inflation rate data is due for the UK, Japan, Canada, and New Zealand.

Nothing is to be expected from the major central banks this week – no regular meetings are scheduled for this week. Nevertheless, the focus should definitely remain on the 10-year yield on a case-by-case basis; from currency to currency. Because they high/low should more or less also determine the rhythm of the stock markets.

Also keep an eye on London! Let’s see if the Conservatives get a grip on their government this week? And then the market calms down…

DEVISE 2 DAY 48h
– Some Market Price Action News

European Shares End Week On Positive Note
European equity markets closed higher on Friday, with the German DAX and the benchmark Stoxx 600 rising more than 0.5% as Prime Minister Liz Truss announced a U-turn on the government’s plan to scrap the planned rise in corporation tax from 19% to 25% next April. Elsewhere, European Central Bank Vice-President de Guindos said the central bank was prepared for a possible technical recession paired with high inflation. On the corporate front, Swiss banking software group Temenos tumbled after slashing its 2022 guidance, while UPM-Kymmene added 5% after the Finnish forestry firm posted higher Q3 results. For the week, the German DAX gained more than 1% while the pan-European Stoxx 600 was little changed.

Gold Drops To 2-Week Low
Gold prices decreased by more than 1% to under $1,650 per ounce on Friday, the lowest in over two weeks and approaching the 19-month low of $1,621 hit on September 26 as new macroeconomic releases supported bets that the Federal Reserve will continue to tighten monetary policy aggressively, strengthening the dollar. Data compiled by the University of Michigan showed that year-ahead inflation expectations rose for the first time since March, exacerbating concerns of unsustainable price growth after September’s CPI print was hotter than expected. In the meantime, ECB President Lagarde saidthat board members are considering unwinding the central bank’s EUR 5 trillion in bonds from its balance sheet, adding to the preference for currencies. Due to its weak position in an environment of rising interest rates, investors continued to shun gold and opt for yield-baring havens as a safe store of value amid surging inflation and heightened economic uncertainties.

Bovespa Falls, Underperforms Global Peers Last Week
Brazil’s Bovespa reversed early gains and fell 2% to around 111,200 on Friday, tracking Wall Street, amid concerns over inflation and the path of future rate hikes. Traders were also digesting a batch of mixed corporate results from major American banks while also closely watching the UK’s turmoil. Domestically, persistent uncertainty about the electoral outcome in Brazil weighed on market sentiment. On the data front, services activity in Brazil grew for the fourth month in a row in August, beating market expectations. On the corporate front, retailers, steel companies and education shares were leading the losses. Also, commodity-linked companies were dragging, led by heavyweight miner Vale and Petrobras. The Bovespa closed the week 4.7% lower, significantly underperforming global indices. Still, year-to-date, the Bovespa is up 6.8%.

Mexbol Falls, Outperforms American Indices
Mexico’s S&P/BMV IPC index fell 0.7% below the 45,500 level on Friday, falling just 0.7% on the week and outperforming other American indices with support from industrial and financial shares, as investors continued to assess fresh releases from the neighboring US for indications of the Fed’s next moves. Domestically, minutes from the Banxico’s latest meeting indicated a broad consensus that there are no signs that core inflation is slowing, pointing to further rate hikes by the central bank. This decision, while supporting the value of the Mexican Peso, increases the likelihood of a recession and demand destruction. Materials shares fell over 2% as gold and silver prices fell 1.5% and 3.4%, respectively.

Sterling Remains Down By Over 1%
The British pound depreciated more than 1% to $1.12 on Friday from an over 1-week high of $1.137 on Thursday, pressured by a stronger dollar and after Finance minister Kwasi Kwarteng was replaced by Jeremy Hunt. At the same time, UK Prime Minister Liz Truss announced that corporation tax will now rise to 25% next year from 19%, returning to plans originally laid out by former chancellor Rishi Sunak, which will end up raising £18 billion per year. Meanwhile, the Bank of England’s emergency bond-buying scheme, which was used to cover pension funds caught up in the market chaos sparked by the tax cuts announced last month, ends today as expected.

US Equities Fall After Gloomy Inflation Forecast
US stocks extended losses on Friday, with the Dow losing nearly 400 points, and the S&P 500 and Nasdaq falling 2.1% and 3.1%, respectively. In the epicenter of the selloff was a report from the University of Michigan showing that US year-ahead inflation expectations increased for the first time in seven months. Such a reading put further pressure on the Federal Reserve to stick to its aggressive stance against runaway price growth and raised concern over a possible recession. Interest-rate sensitive tech shares declined over 2.5% on the news. Energy shares also declined over 3% as crude oil and other energy commodities declined. On the corporate side, JPMorgan, the biggest US bank by assets, rose more than 2% after reporting third-quarter results for profit and revenue that surprised investors on the upside. Wells Fargo also enjoyed some robust gains after revenue top estimates. The Dow was still up 1.2% this week, while the S&P 500 fell 1.3% and the Nasdaq 3.1%.

Wall Street Selloff Resumes
US stocks extended losses in afternoon trading Friday, with the Dow losing almost 300 points, and the S&P 500 and Nasdaq falling 1.9% and 2.4%, respectively. In the epicenter of the selloff was a report from the University of Michigan showing that US year-ahead inflation expectations increased for the first time in seven months. Such a reading put further pressure on the Federal Reserve to stick to its aggressive stance against runaway price growth and raised concern over a possible recession. On the corporate side, JPMorgan, the biggest US bank by assets, rose more than 2% after reporting third-quarter results for profit and revenue that surprised investors on the upside. Wells Fargo also enjoyed some robust gains after revenue top estimates. On the flip side, Morgan Stanley’s and Citigroup’s shares came under pressure, with both banks reporting quarterly profits that came below forecasts.

Russian Stocks Remain Close to 5-Year Low
The ruble-based MOEX Russia index closed 0.3% lower at 1,949 on Friday, halting three consecutive sessions of gains and remaining relatively close to the five-year low hit this week as worsening geopolitical developments compounded the deteriorating macroeconomic backdrop. DEVISE 2 DAY
– Where I Was Wrong, Were I Was Right

In the last few weeks, I have clearly focused on the Dow Jones Future. Having briefly completed a successful long 4XSetUps Trading Capability in the somemr; I’m also a bit confident that we will be able to recover a bit in the US stock market!? How wet?! We’ll have to show that – of course I don’t know that either. Which is why I formulated a long/short Trading Switch 4XSetUps Trading capability. More about that as usual in the Technical Analysis 4XSetUps.

In USD, we got to the 9/11, 2001 level quicker than I ever imagined. It’s probably like that for most people, so I wouldn’t be surprised if we might get a short, sharp devaluation. And then again in the medium term, even in the long term, to start again at a low level. But maybe that’s just my personal, subjective, individual paranoia, due to the incredibly good development in the last few weeks and months. Therefore also place the stop price at 110 USD index points. And wait until it levels off again underneath; so that we can then go long again cheaper. Should there unexpectedly be a fight for the 110 price zone, then we remain long above the USD 110 index point.

Just like us, we remain short UKOIL below USD 100.

Regardless of our 4XSetUps, let`s focus this week also on London!
Because the problems in the British capital market could spread to other countries. One possible fire accelerator is lending — and a special class of structured securities. Last week, the chaos days in Britain continue. Prime Minister Liz Truss surprisingly fired her Chancellor of the Exchequer, Kwasi Kwarteng, on Friday, replacing him with former Secretary of State Jeremy Hunt. At the end of September, Kwarteng’s tax cut plans triggered violent upheavals on the British bond market and sent the pound plummeting. After he had already withdrawn a cut in the top tax rate, Truss announced on Friday that he would raise the corporate tax as planned. This did not reassure investors: the yields on British government bonds rose again. The Bank of England (BoE), meanwhile, seems to actually want to end its emergency purchase program for British bonds. That`s why focus on the GBP vs. The other major currencies. I wouldn`t wonder, if he creates a trend-reversal, at these crazy times. But be careful. I don’t have to be the first, let alone the last – in any trend. And above all not in the GBPUSD cross-rate, which is currently being traded around historic lows…