29.11. 2018
US stocks (sector performance) saw major US indices gaining between 2% and 3% following Fed Chairman J. Powell’s speech at the Economic Club of New York where he took a dovish turn, signaling that Fed funds rates are “just below” neutral, a major a step back from his earlier comments in the fall where he implied that the FOMC still had ways to go. Expectations are now for one more rate hike in December and one last one next year. J. Powell also signaled that he saw no signs of bubbles developing in capital markets, either in stocks or elsewhere with the exception perhaps of some overvaluation in certain segments of the high yield market. He also took confidence in banks now having much more high-quality capital than before the global crisis. He also jokingly reminded as he addressed the topic of financial stability that the last time a Fed official addressed this audience was on March 18, 1929 when the Fed had issued a public statement of concern over stock market speculation as it provided guidance frowning on bank funding of such speculation. European Equity markets were closed at 6PM CET time when Fed Chair Powell delivered his speech but futures suggest only a mild positive response so far from European indices. The possibility of D. Trump imposing a 25% tariff on European cars to pay for the 16’000 workers fired at GM is a distinct risk that markets needed to integrate. Overnight, Emmanuel Macron cast blame on Donald Trump’s policies for hurting allies in Europe. Asia’s rally was also tame this morning, held back by the approaching G20. As suggested yesterday, investors have been looking for any excuse to buy by fear of missing out on a possible year-end rally. It seems that they got what they wanted (and D. Trump as well) with J. Powell sort of blinking yesterday, causing a stampede of short covering in risky assets. The important second market hurdle to overcome remains the G20 meeting. The art of the deal may still culminate with a truce or a promise for renewed negotiations and not much else. The market “needs” a deal and Trump knows it, as much as it needed the Fed to signal a more dovish inclination yesterday.
Important Disclaimer © Copyright by BentinPartner llc. This communication is provided for information purposes only and for the recipient's sole use. Please do not forward it without prior authorization. It is not intended as a recommendation, an offer or solicitation for the purchase or sale of any security or underlying asset referenced herein or investment advice. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situation, investment horizon and particular needs. This report does not include information tailored to any particular investor. It has been prepared without any regard to the specific investment objectives, financial situation or particular needs of any person who receives this report. Accordingly, the opinions discussed in this Report may not be suitable for all investors. You should not consider any of the content in this report as legal, tax or financial advice. The data and analysis contained herein are provided "as is" and without warranty of any kind. BentinPartner llc, its employees, or any third party shall not have any liability for any loss sustained by anyone who has relied on the information contained in any publication published by BentinPartner llc. The content and views expressed in this report represents the opinions of Marc Bentin and should not be construed as guarantee of performance with respect to any referenced sector. We remind you that past performance is not necessarily indicative of future results. Although BentinPartner llc believes the information and content included in this report have been obtained from sources considered reliable, no representation or warranty, express or implied, is provided in relation to the accuracy, completeness or reliability of such information. This Report is also not intended to be a complete statement or summary of the industries, markets or developments referred to in the Report.