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 % change Value Change Dow…

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Bond yields and stocks slug it out

Bond yields

Bond yields create fear factor The fears over falling bond prices that gripped the market last week receded on Monday, 1st March 2021, as European stocks and U.S. stock futures rose as bond yields fell. The surge in bond yields bashed equity markets last week, with the technology heavy Nasdaq losing some 5%. Rising yields make the relative valuation of stocks appear worse as yields move in the opposite direction to prices. Central banks Central banks will eventually most likely have to react if there is a sustained rise in…

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Talk of Inflation and a Stock Market Bubble gain traction

Inflation

Is inflation becoming the real test of market durability in 2021? Inflation, during these times, is an unknown quantity, even an unspoken term from times past, something to talk about . But it may soon make a fresh appearance in world economies, and when it does, the fledgling world economic recovery will likely suffer again, despite all of the financial support ploughed into the ‘system’. The pressure on interest rates to rise again will increase. Something has to go pop! Central banks Our current batch of Central bankers pretty much…

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Fed stress tests U.S. banks & Wall Street mini-rally

Federal Reserve

Stress test The Federal Reserve warned that in a worst case scenario, some banks reserve capital would fall close to minimum capital requirements, with lenders subjected to loan losses of up to $700 billion. The central bank directed 33 of the largest U.S. banks to suspend share buybacks and cap dividend payments. Bank shares including , J P Morgan Chase, Goldman Sachs and Wells Fargo all fell in extended trade after hours, all three having rallied during the normal trading session ahead of the results. So, all the banks have,…

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The Bank of England increases UK economic support by £100 billion

Quantitative Easing

More QE The Bank of England announced Thursday, 18th June 2020 more support by increasing QE – Quantitative Easing by injecting a further £100 billion into the UK economy. This increase brings the total to £745 billion. Bank policymakers voted 8-1 to increase the size of its bond-buying programme and said there was evidence that the UK economy would be impacted less than initially feared. The Bank said more recent indicators of economic activity suggested the economy was starting to bounce back. It was reported that there had been a…

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Markets and the ‘real’ economy are out of whack

Invest or guess

Is this a good time to invest in stocks? Probably not. The dislocation between markets and the real economy is, in my opinion, unsustainable. Extremely powerful monetary policies and stimulus measure put in place by central banks and governments to protect the ‘economy’, have given the green light for markets to go crazy! The markets are a-wash with money. But investing now will likely become a mistake. How can you fail? Throwing a dart at a random list of stocks will likely give you a winner in this market! This…

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Stocks continue upward grind

Stock grind higher

Stocks continue to grind ever higher pushing many indices to reach new peaks as global stocks play catch-up with the U.S. The S&P 500, for example, is now only around 5% from its year high – a remarkable recovery from the March 23rd low. The index is now 40% above its coronavirus collapse. Forward PE multiple has risen to a twenty year high of 22.40 making shares rather expensive – but this isn’t holding it back. Can this recovery continue? Will there be a shock to U.S. GDP in the second quarter? U.S.…

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Markets upward trend continues, for now?

Stocks and Shares

Good news UK and U.S. markets were closed Monday 25th June 2020 – but that didn’t stop European markets roaring ahead yesterday. There are a number of positives for markets to be happy about right now. England is to re-open non-essential shops by mid June. European countries are easing their lockdown measures. Spain is looking to resurrect their holiday season this summer by ending quarantine of arrivals by 1st July. Germany’s Ifo business survey indicated ‘things’ are likely better than thought, and this despite entering recession. The death rate in…

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Central bank stimulus can’t go on forever

Central bank

Money machines Central banks have been pumping money into their respective economies around the world. But it can’t go on forever, and at some point economies will have to learn to stand on their own two feet again. It won’t be easy. Coming out of lockdown Countries around the world are attempting to break lockdown measures put in place to spite the coronavirus. It’s going to be a tough journey. We don’t yet fully know just how much damage has been caused by these policies – and we fear a…

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Stranger times

Market crash

On the 14th February I posted an article entitled, ‘Strange times – have U.S. markets gone mad’? Strange times – have U.S. markets gone mad? Shortly after that post, this happened… By the third week in February 2020 U.S. markets were holding up at all time highs and on the 12th February the Dow climbed above 29500 for the first time, fast chasing 30000. Euphoric highs The U.S. markets were screaming up – flying high on rocket fuelled steroids! I just couldn’t believe what I was seeing, especially so with…

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