This morning’s market is like driving a car over potholes, it may be bumpy, but you're rarely in danger with the thought of a FED and PBoC policy backstop. But if we hit a significant economic air pocket or a super spreader risk-off vortex, all bets are off
It is brutally impossible to evaluate theCovid19 impact given the scarcity of data since the outbreak. An election influenced US PMI didn't cut it, and the massive decline in China car sales was expected. And while it's tremendous and risk helpful to see PBOC Vice Gov Chen stating the bank will conduct RRR discounts soon, but for stimulus to work, to put it simplistically, people have to return to work for supply chains to return to full speed. And for this to happen, there seem to be more and more obstacles in the way than many currently appear to assume. And what should be obvious to say that especially the equity markets where the bullishly ingrained mantra of 'stimulus-is-always good' might turn out not to be the case this time around.
Weekend news flows aside. The biggest problem is that the market is still relatively complacent, with investors apparently magnetized to the SPX 3300. For the next week or possibly month or so, it's challenging to visualize the virus transmission outside of China to reverse again. If we get more Asian counties declaring a red travel alert and possibly causing Tokyo to rethink 2020 Olympic plans or even cancel, these shockwaves will crush market sentiment, and the program selling would kick in where 5-10 % drop in global equities is possible as there little policy room for the ECB, BoJ or other NIRP economies central banks to toggle monetary policy lower.
SPI Asset Management provides forex, commodities, and global indices analysis, in a timely and accurate fashion on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.
Our publications are for general information purposes only. It is not investment advice or a solicitation to buy or sell securities.
Opinions are the authors — not necessarily SPI Asset Management its officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.
Recommended Content
Editors’ Picks
EUR/USD stays near 1.0400 in thin holiday trading
EUR/USD trades with mild losses near 1.0400 on Tuesday. The expectation that the US Federal Reserve will deliver fewer rate cuts in 2025 provides some support for the US Dollar. Trading volumes are likely to remain low heading into the Christmas break.
GBP/USD struggles to find direction, holds steady near 1.2550
GBP/USD consolidates in a range at around 1.2550 on Tuesday after closing in negative territory on Monday. The US Dollar preserves its strength and makes it difficult for the pair to gain traction as trading conditions thin out on Christmas Eve.
Gold holds above $2,600, bulls non-committed on hawkish Fed outlook
Gold trades in a narrow channel above $2,600 on Tuesday, albeit lacking strong follow-through buying. Geopolitical tensions and trade war fears lend support to the safe-haven XAU/USD, while the Fed’s hawkish shift acts as a tailwind for the USD and caps the precious metal.
IRS says crypto staking should be taxed in response to lawsuit
In a filing on Monday, the US International Revenue Service stated that the rewards gotten from staking cryptocurrencies should be taxed, responding to a lawsuit from couple Joshua and Jessica Jarrett.
2025 outlook: What is next for developed economies and currencies?
As the door closes in 2024, and while the year feels like it has passed in the blink of an eye, a lot has happened. If I had to summarise it all in four words, it would be: ‘a year of surprises’.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.