- How can you price something you don't know and situtations you have not seen before. Welcome to the New world order (Brexit and World of Negative Yields)
- The Message is - SAFETY FIRST. It seems like people are seeking safety in the comfort of herd.
- Comfort of herd: There is no conviction. What else can explain: dramatic sell off post June 23rd vote and then equally strong comeback.
- Where is the SAFETY? - Sovereign Bond Market. Global bond markets are in an epic, unprecedented bubble now. Bond yields are at record lows, with more $10 trillion of bonds trading with negative yields
- US 10 Year Treasury yield now trades at 1.32%. That’s much much lower than even the darkest days of the global financial crisis
- Just imagine: At the start of 2016 - there was expectation of minimum 4 rate hikes by US Fed in 2016. Now people are talking of rate cut.
- Speaking of Safety: Why Yen is considered as Safe Haven? USDJPY now at 100.6
- The two events that broke the back of rate hike expectation: Last Month Jobs data release - Addition of 38000 jobs only; and then on June 23 - UK voters voting for BREXIT.
- Two clear impacts of BREXIT visible now
BREXIT vote impact:
Sterling drop to $1.27 against the U.S. dollar
Commercial property prices in free fall, Property funds are frozen
— Deepak Singh (@smarket) July 6, 2016
- Is Political Uncertainty over in UK? Theresa May looks on track to become the U.K.’s next prime minister after a week of intense drama and series of high profile resignations.
- Silver is the NEW Gold
- Is the world ready for slow growth and small returns? The argument: If world real growth is 2%; inflation at 2% and productivity at 1% - then one cannot expect returns of more than 5%
- The Real Problem: Demographics in Developed world.
- The current state of US equity market. S&P50 continues to trade near all time highs
- It is not the earnings that has sustained the market strength but trillions of dollars of buybacks
- The Biggest worry: Fear does incredible damage to investor psychology. Will the state of the market cause recession?
- State of US economy: What matters - Jobs data on coming Friday
- There is still the HOPE that US economy will help stabilize the world.
- Twitter Wisdom.
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Silver is up 45% in CY 2016. Silver is the New Gold. https://t.co/A1SPZzhagC
— Deepak Singh (@smarket) July 5, 2016
Change in GDP = Function of Change in Working Population + Change in Productivity growth.
Western world struggling with working population
— Deepak Singh (@smarket) June 28, 2016
Since mid-2012, S&P 500 earnings have risen only 11% vs a 37% rise in P/E. pic.twitter.com/fxy0vcl08B
— Worth W. Wray (@WorthWray) July 5, 2016
This how the recession begins... pic.twitter.com/uA8z7Rc9by
— Richard Baldwin (@BaldwinRE) June 27, 2016
— Worth W. Wray (@WorthWray) June 26, 2016
As traders we have opinions, as good traders we don't stick to those opinions.
— Robert Dunn (@TraderGoalieOne) May 12, 2016
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers