Market outlook, US stock market

Why 2015 resembles 1987 before Black Monday: central banks and rate hikes

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:

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History of markets

Why did Black Monday happen in 1987: Reaganomics, the Plaza Accord and the German rate hike

Throughout the last hundreds of years, the essence of the financial markets has never changed, and the investors repeatedly experience absurd financial bubbles of the common root.

This perhaps gives this article some significance, as we explain here the cause of Black Monday in 1987. Many say there was no specific reason of the market crash, or it is difficult to identify the cause, but some great investors indeed predicted the collapse in advance, as there were the definite causes of the bubble we can explain here.

Continue reading Why did Black Monday happen in 1987: Reaganomics, the Plaza Accord and the German rate hike →

Currencies, Market outlook, US stock market, USD/JPY

Correction or crash?: Worldwide stock plunge, US rate hike, commodity market crash, Chinese yuan devaluation

Our readers wouldn’t be surprised at the ongoing turmoil in the global stock markets as we’ve been warning about the decreasing liquidity and global economies’ slowdown:

However, we feel China’s currency devaluation increased investors’ worries further, so that the plunge became rapid and radical. For investors who’ve got concerned about their positions, we explain which trend in the markets is unchanged and what we can buy during the turmoil.

Continue reading Correction or crash?: Worldwide stock plunge, US rate hike, commodity market crash, Chinese yuan devaluation →

News

2015 2Q Japan’s GDP: Households struggle due to consumption tax hike, industries do better

Japan’s real GDP for the second quarter of 2015 has been published, and the real GDP grew by 0.71% (year-on-year) during the quarter.

The details suggest the house holds are struggling due to the consumption tax hike in 2014, and this tendency could accelerate after another consumption tax hike in 2017. The growth of fixed investment implies industries are doing better because of the quantitative easing, although the exports slowed down despite the weak yen.

2015-2q-japan-real-gdp-growth

Continue reading 2015 2Q Japan’s GDP: Households struggle due to consumption tax hike, industries do better →

Foreign exchange market, Market outlook

Why the Fed is so hawkish and rushing to raise the interest rate

Recently, the Fed seems quite hawkish and rushing to raise the interest rate. According to Reuters, Mr Lockhart, Atlanta Fed President, insisted the point of “lift off” is close.

Although the GDP growth remains to be over 2%, the speed of the growth is weakened, and the CPI is still far from their inflation target of 2%.

This means there are other reasons for the rate hike than just the economic recovery of the country. The Fed is actually getting pushed to raise the interest rate by some other fear: the reverse flow of the portfolio rebalancing.

Continue reading Why the Fed is so hawkish and rushing to raise the interest rate →

Commodity markets, Market outlook

The commodity market crash leads to worldwide deflation: gold, crude oil, natural gas, copper and iron ore

The commodity markets are tumbling. Gold, oils and almost all the other commodities are immensely depreciated. It may be seemingly explained by the Fed’s rate hike and the slowdown of the Chinese economy, but the two following factors can’t be explained by them:

  •  The prices are radically falling even in the currencies with the quantitative easing, such as the yen and the euro.
  • The prices have fallen to the range before the US started the QE after the financial crisis in 2008.

Although the Fed has surely stopped the QE, they haven neither sold the purchased bonds nor raised the interest rate. If, in addition, the Bank of Japan and European Central Bank stopped the QE, the commodity prices could tumble further, so that what has happened after the massive QE is the deflation. It would be very unreasonable, and so investors need to conceive a reasonable explanation for it.

Continue reading The commodity market crash leads to worldwide deflation: gold, crude oil, natural gas, copper and iron ore →

Currencies, USD/JPY

2015-2016: Bank of Japan’s monetary base and timeline for QE and its expansion

Since the Bank of Japan started the massive quantitative easing in early 2013 and then expanded it in late 2014, it’s remained silent on whether or not they’re planning more easing in the future.

Will they plan further easing? Our answer is yes, but there are a few possibilities for the timing. At the earliest it will be from Sep to Dec 2015, or at the latest it will be 2017. We shall discuss the data to explain why.

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Currencies, USD/JPY

2015-2016: What will happen to USD/JPY when the BoJ expands the QE further?

As the BoJ only claimed it would continue its quantitative easing until mid 2016, investors are now speculating whether the central bank extends the easing or not.

In this article, we discuss the impact of the QE extension/expansion to USD/JPY to clarify if the BoJ has an effective means to affect the currency market to support the inflation. We first review the chart of the monetary base ratio:

2015-jun-japan-us-monetary-base-ratio-and-usd-jpy Continue reading 2015-2016: What will happen to USD/JPY when the BoJ expands the QE further? →

News

US GDP weakened at 2Q 2015 but still strong enough for a rate hike in Sep

The GDP of the US grew by 2.32% in the 2nd quarter of 2015, weakened from 2.88% in the same quarter of the previous year. The US economy is affected from the strong dollar, but the number is still strong enough to justify the Fed’s rate hike in Sep.

2015-2q-us-real-gdp-growth

If we see the details, investment and exports are weak as expected, but the slowdown of imports is a bit of surprise. Personal consumption is weakened, too, which indicates with imports the weak demands within the country.

Continue reading US GDP weakened at 2Q 2015 but still strong enough for a rate hike in Sep →

Commodity markets, Market outlook

When to buy gold in 2015/2016: Gold is a way to avoid the market crash in the near future

In early 2015, the gold price remained approximately $1150-1250, but as the Chinese economy slowed down, the price finally fell below $1100 in July.

As the Fed was going to rise the interest rate, the bear market itself was predicted by some investors. When the rate rises, the higher yield makes the dollar more attractive, and as a consequence, the gold price, traded in USD, decreases.

However, now we have another influential factor: the slowdown of the Chinese economy, which became more serious than before. So in this article, we contemplate on the two factors that affect the gold price and explain why gold is still a way to avoid the upcoming market crash in a few years.

Continue reading When to buy gold in 2015/2016: Gold is a way to avoid the market crash in the near future →

Analysis and Practice in the Global Markets