VGSH - Market Set To Get Back Into Full Swing
2023-09-11 14:20:00 ET
Summary
- The dollar has been higher for the last 8 weeks. The Fed raising rates and holding them higher for longer is contributing to that rise.
- We are starting to see tremors of volatility in currencies, from the Mexican peso to the Japanese yen. The Fed may soon be faced with a dilemma. Fight inflation or cause a currency crisis?
- The market is set to get back into full swing. CPI inflation data hits on Wednesday, and the Federal Reserve meets the following week.
The Saudis are planning to sell another $50 billion in shares in the national oil company known as Aramco ( ARMCO ). You can bet that the Saudis and friends will try to keep the price of oil trending towards $100 a barrel until they do. The Strategic Petroleum Reserve is the lowest it has been in some time. I think that the administration will not let that stop them from tapping into it again to keep oil prices down. I doubt they will have much luck. There are things happening on the geopolitical stage that are tailwinds at the back of oil prices. We told you that we didn’t think that the battle against inflation was over.
The dollar has been higher for the last 8 weeks. The Fed raising rates and holding them higher for longer is contributing to that rise. We are starting to see tremors of volatility in currencies, from the Mexican peso to the Japanese yen. The Fed may soon be faced with a dilemma. Fight inflation or cause a currency crisis? The US is the world’s central bank, and the world is dependent on dollars. An example is that a country may have its debt denominated in US dollars. Why? No one trusts that country’s currency, so to float the debt, it is priced in dollars. When the dollar goes up, it is harder for that country to pay back their debt, and they must buy dollars - driving the price even higher. You get my drift. A further rise in interest rates and further rise in the dollar is going to cause problems in the emerging market and currencies such as the peso and the yen.
We have written about the Generals of the market in the past and their performance is becoming a concern. We have certain stocks in the market that we consider Generals. The Generals lead the market. Some of those Generals are Apple ( AAPL ), Nvidia ( NVDA ) and LMVH ( LVMUY , LVMHF ), the leading luxury goods brand company. They have been taking a beating of late. Will the rest of the market follow?
The market is set to get back into full swing this week as traders get back from the Hamptons. CPI inflation data hits on Wednesday, and the Federal Reserve meets the following week. Our volatility indicator went red briefly but is back to yellow. It means to us that volatility is about to pick up in the markets, so we are a bit cautious here and looking for a selloff. The end of this week brings one of the largest options expirations of the year, which could hold the key to unlocking markets and bringing that volatility we have been banging on about.
For now, our signal refuses to go fully red. Maybe the market is going to cool off enough and downside hedges will accumulate, which will cushion any news to come our way. We don’t think so. We will continue trusting but verifying our data. The market is due for a burst of volatility. We hope to take advantage.
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
Market Set To Get Back Into Full Swing