Stock markets conditioned to run on central bank support

Bank

Market movement

Stocks and oil prices fell on Thursday after the U.S. Federal Reserve intimated it could soon cut back its support

An increase in the spread of covid-19 delta variant, signs of Chinese economic weakness and the Taliban’s takeover of Afghanistan also spooked investors.

FTSE 100, Dow and S&P 500

FTSE 100 was down 1.5% in afternoon trading. The Dow Jones fell 86 points at the open, while the S&P 500 lost 0.40%. Later, Nasdaq and S&P 500 eked out small gains.

U.S. markets% changeValueChange
Dow CLOSED at-0.19%34894-66.50
Nasdaq CLOSED at+0.11%14542+16.00
S&P 500 CLOSED at+0.13%4406+5.50
Dow lost ground again Thursday, 19th August 2021 – (figures rounded)

Support due to slow

Today’s market moves and the minutes from the Federal Reserve’s latest meeting serve as a wake up call for just how much markets running on central bank support. In my opinion there are many risks in the market right now.

Roundup of market news

UK government borrowing shrinks in July but remains second highest on record – Government borrowing shrinks in July – BBC News

U.K. Retail Sales Fall in Signal Recovery Losing Momentum – U.K. Retail Sales Fall in Signal Recovery Losing Momentum – Bloomberg

It is reported the volume of shop and online sold goods dropped 2.5% last month after a 0.2% gain in June.

Hackers steal nearly $100m in Japan crypto heist – Hackers steal nearly $100m in Japan crypto heist – BBC News

Chip shortage: Toyota to cut global production by 40% – Chip shortage: Toyota to cut global production by 40% – BBC News

Tech

Elon Musk unveils plans for humanoid robot that uses Tesla’s artificial intelligence – Elon Musk unveils plans for humanoid robot that uses Tesla’s artificial intelligence – MarketWatch

Asian stocks fell as the fast-spreading delta virus strain stoked concerns about economic growth and China’s regulatory curbs sapped sentiment

China passes major data protection law as regulatory scrutiny on tech sector intensifies – China passes key data protection law as regulatory scrutiny increases (cnbc.com)

The rules add to tightening of tech regulation in China, particularly around data, which could impact the way China’s technology giants operate.

Elon Musk and his AI project

Musk said he hopes the robot is not perceived as something “dystopian,” and that it could even “be your friend.” When asked in a Q&A session about the possibility of superhuman AI eventually running amok, Musk said that while that’s a concern, Tesla is aiming to make “useful,” or “narrow,” AI that will be used “unequivocally” for good.

Tesla is under U.S. scrutiny after the electric car maker’s AI autopilot tech malfunctioned – this has resulted in deaths and subsequently sparked lawsuits in the U.S.

AI

The company has long said Autopilot makes driving safer, and that it makes it clear that drivers have to be alert and prepared to take over at any time upon engaging Autopilot. Musk said that Autopilot’s basic purpose is to avoid crashes, and said it does that very well.

Like it or not – AI is gaining momentum and will be a major part of our future world. As technology progresses – is now the best time to invest in the next big tech winner 20 years from now?

Market events & conclusion

The UK and Canada report retail data today.

Markets remain under pressure as we move into the weekend. Tech stocks in particular may have peaked and we are now witnessing a pullback.

Central bank support is massive at all levels – world debt is at an all time high! The U.S. Federal Reserve indicated tapering will start soon and this reduction in ‘free’ money will spook investors. The stock market must realise that support can’t go on forever.

My positions

I hold shorts on the FTSE 100, Dow, Nasdaq and S&P 500

More updates to follow Monday

Related posts

Leave a Comment