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.
Continue reading The financial markets in 2016: the forecast for stocks, bonds, currencies and commodities
As the Fed remains unclear about when it raises interest rates, the investors are starting to doubt the Fed’s will for a rate hike. The doller is getting weak, and the gold price rebounded.
In the global markets, we also need to note that one central bank’s policy affects another central bank’s policy, and at the moment, this is the most true with the Fed and the Bank of Japan.
The Fed’s aim
As we explained in the following article, the Fed is not waiting for the further improvement of the labour market, but we estimate its aim is the depreciation of the stock market itself:
Continue reading USD/JPY: If the Fed postpones a rate hike, Japan’s QE expansion would also be delayed
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
The FOMC meeting was held on 17th of September, and the Fed decided to leave interest rates unchanged. Investors were speculating the Fed might raise interest rates in this meeting.
Richmond Fed President Jeffrey Lacker voted against this decision, insisting the Fed should raise interest rates by 0.25%.
Press conference by Federal Reserve Chair Janet Yellen is scheduled after this meeting. She is expected to explain about this decision and the Fed’s future monetary policies. For more information about the Fed’s rate hike, see the following articles:
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
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
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
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