It was an interesting week on the market, with the MSCI Russia Index rising 1%, but all other key indexes slipping into negative territory - in some cases for the first time in many weeks. With declines of just 1.5% in Europe and 0.5% in the US, we remain far short of a significant correction though. For it's part, gold rose strongly, in line with our Investment Idea from last week. What can we expect this week?
In sharp contrast to the preceding week, the closing days of August bring a heavy flow of important economic data. Volatility can be expected to rise as this data flows through, although it will take some sharp surprises to cause a significant market break either up or down. Trading through the week will represent efforts to predict the outcome of FOMC Chairman Ben Bernanke's key-note speech at the Jackson Hole central banking conference on Friday. The market widely expects clear guidance about the most likely form, and possible timing of further stimulus efforts in the US.
US growth is currently strong enough to dampen the chances of immediate outright monetary expansion (further QE). But, the US economy faces severe enough political and economic challenges further ahead. As such, the FOMC has guided investors to expect news this week. Given that we still haven't seen anything that could be honestly regarded as a correction, the near-term market direction remains uncertain. Sharp declines absent fundamental moves remain unlikely and would represent a tactical buying opportunity ahead of central bank guidance (in addition to Jackson Hole, the ECB will meet next week). Whilst the global risks remain high, summer-going traders missed this rally, and the central banking phase continues to dominate other risks.
Best regards,
James
In sharp contrast to the preceding week, the closing days of August bring a heavy flow of important economic data. Volatility can be expected to rise as this data flows through, although it will take some sharp surprises to cause a significant market break either up or down. Trading through the week will represent efforts to predict the outcome of FOMC Chairman Ben Bernanke's key-note speech at the Jackson Hole central banking conference on Friday. The market widely expects clear guidance about the most likely form, and possible timing of further stimulus efforts in the US.
US growth is currently strong enough to dampen the chances of immediate outright monetary expansion (further QE). But, the US economy faces severe enough political and economic challenges further ahead. As such, the FOMC has guided investors to expect news this week. Given that we still haven't seen anything that could be honestly regarded as a correction, the near-term market direction remains uncertain. Sharp declines absent fundamental moves remain unlikely and would represent a tactical buying opportunity ahead of central bank guidance (in addition to Jackson Hole, the ECB will meet next week). Whilst the global risks remain high, summer-going traders missed this rally, and the central banking phase continues to dominate other risks.
Best regards,
James
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