The US economy only grew 1.80% (year-on-year) in the 4th quarter of 2015, slowing down from 2.15% in the 3rd quarter, according to the real GDP data. Regarding its elements, the personal consumption, the fixed investment, the exports and the imports decelerated respectively.
As you see in the chart, the worst element is the exports. It is also notable that the personal consumption did not accelerate despite the radical decline in energy prices.
The US stock market still remains at around the all-time high after the Fed started raising rates, and that is because investors believe, rationally or not, that the strong US economy will keep equity appreciated even without the support of the Fed. However, the US economy will slowdown, and then the stock market will lose its last resort.
As the last article discussed the overall view of the financial markets in 2016, this article aims to specifically discuss the stock market.
We have insisted the easy market fuelled by the QE is already over, and the stock market will face difficulties and uncertainties. The following three remarks conclude our general forecast for the US stock market:
In such a situation, mere buying or selling cannot be profitable. Both of short selling and the long-short strategy have some flaws. Then what can we do? After long contemplation, our conclusion is as below.
The easy market for investors supported by the Fed’s quantitative easing is already over, and now the question is merely when, not if, the asset bubble bursts in several markets. The assets in a bubble are stocks, bonds and the dollar.
The Fed has ended its QE programme and is now in a process of raising interest rates. Will the US stock market be okay? It can never be okay as the central bank has injected trillions of money and is now going to retrieve it, but the market is manifesting groundless optimism.
The greatest premise investors believe in is the strong US economy and thus the strong dollar. However, the time is near for the uptrend of the dollar to be fading out. Why, how, and when? We will explain it in this article.
As we have written, there is no large economy in the world that is growing rapidly. Reflecting the decreasing demands in the world, including the Chinese economy slowdown, the commodity markets completely collapsed, such as copper and iron ore.
However, it does not mean any single small country does not enjoy any significant growth. Thus, we review the world’s economy again to find out which area is the most profitable for investors to bet on.
Bill Gross, a famed bond fund manager of Janus Capital, explained in the Twitter account of Janus Capital about how to trade in the very volatile stock markets.
Earlier this year, Mr Gross also successfully predicted the bear market in German bonds and the plunge of the Chinese stocks. He is without a doubt one of the greatest investors who correctly understand the market situation before the Fed’s rate hikes, the opinion of whom is worthwhile to follow.
Continue reading “Bond King” Bill Gross explains how to trade in equity markets amid the turmoil
After the stock plunge in August, the global stock markets rebounded once, and they are now confirming their second bottom. The stock market plunge was essentially caused by the lack of the driving force for the global economies, proven by the Chinese slowdown, and it will continue until the authorities take any action, namely further monetary easing or financial stimulus.
However, if S&P 500 goes down by more than 20% from the peak, there would be a possibility that the central banks would rescue the financial markets. As we have been bearish about the stocks before August, we are also responsible to explain the future of this bear market.
Continue reading S&P 500 could go down by 30% in 2015 to urge central banks to ease further
In September, despite the market’s speculating that the Fed might raise interest rates, the Fed decided to leave rates unchanged, postponing a rate hike.
Despite our guess, it also did not particularly emphasize its intention to raise rates within the year, even though there is an obvious difference of recognition between the Fed and investors in expecting how fast the Fed is going to raise rates in the next few years.
Is the Fed intentionally leaving the gap as it is? If the answer is yes, and there is some hidden strategy behind the Fed’s attitude, it might imply what the Fed truly wants to do, and it is neither about the labour market nor the inflation. It is something else.
Continue reading The Fed wants US stocks to go down to degas the QE bubble
On 16-17 Sep, the Fed will hold the FOMC meeting with a possibility of a rate hike for the first time since the subprime mortgage crisis. The result will be published on the 17th.
Although we have already been writing about the Fed’s rate hike, we would like to summarize our opinions here. We regard the following 2 scenarios as highly likely: Continue reading Will the Fed raise interest rates in FOMC on 17 Sep?
After the radical plunge in the global stock markets in August, the stock prices rebounded once and are seeking its direction after this turmoil.
Investors are carefully watching what the central banks will do. Some of them first even expected the Fed might restart the QE, but after the Fed policymakers revealed to remain seeking a rate hike, this kind of subjective hopes disappeared. We already explained why they would remain hawkish:
Continue reading Why 2015 resembles 1987 before Black Monday: central banks and rate hikes