For sure, interest rates are still well anchored at low levels and supporting valuations, but a twitchy Fed on the move towards tapering and increasing worries over growth and supply constraints are acting as increasing headwinds to more gains
Hussein Sayed, chief market strategist at Exinity Group.
Higher volatility and fragile sentiment have been evident in financial markets recently. The persistence of coronavirus continues to weigh on the economic outlook and dampen global growth expectations. And a tightening regulatory backdrop in China and an uncertain geopolitical situation in Afghanistan only add to the current risk-wary environment.
The FX space has seen a near classic reaction unfold with the Japanese yen, Swiss franc and the US dollar all outperforming, while commodity currencies suffer amid low conviction and participation.
After printing several days of consecutive all-time high closes, the US equity markets have come back down to earth, albeit just a few percentage points off the tops. The richly valued S&P500 index current valuation sits around 22 times forward earnings, high by historical standards. But the enduring issue remains the breadth of the market with market risks still residing in the crowded tech sector.
The S&P500’s five largest stocks by market capitalisation are the well-known tech titans, which make up roughly 23 percent of the index. It is worth noting that the comparable figure at the peak of the dotcom boom in the early 2000s was 18 percent.
For market watchers who use technical analysis and charts to make investment decisions, the 15,000 level in the Nasdaq looks to be a key level which the tech-laden index is struggling to push above.
For sure, interest rates are still well anchored at low levels and supporting valuations, but a twitchy Fed on the move towards tapering and increasing worries over growth and supply constraints are acting as increasing headwinds to more gains.
Fragility has also been seen in gold, which has had an extremely volatile time over the past couple of weeks. After appearing to find support around $1,800 in July, the precious metal fell sharply after this month’s stronger than expected US jobs report. A second straight bumper non-farm payrolls number had sent the US dollar and US bond yields higher, never a good sign for commodities.
The weak close on the first Friday of the month then saw a “flash crash” with gold dropping more than 4 percent on the opening of the new week in Asia. Prices spiked down to a low of $1,677 on the back of extremely limited amounts of liquidity.
Gold prices spiked down to a low of $1,677 on the back of extremely limited amounts of liquidity.
This type of volatility is not uncommon during the early hours of the Asian time zone. However, gold bugs have stemmed further losses with the Springtime lows from March and April acting as a reliable level of support.
Gold hasn’t been trading as it historically does recently. Falling bond yields have failed to boost the price, but their turnaround recently triggered a strong negative reaction. Indeed, flash crashes and capitulation like we have seen recently can signal that a major low is in place.
Softer economic data tempering Fed expectations plus the Delta spread hurting global growth and risk taking may also provide support to the precious metal in the near term.
Hussein Sayed, chief market strategist at Exinity Group.
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For sure, interest rates are still well anchored at low levels and supporting valuations, but a twitchy Fed on the move towards tapering and increasing worries over growth and supply constraints are acting as increasing headwinds to more gains
Hussein Sayed, chief market strategist at Exinity Group.
Higher volatility and fragile sentiment have been evident in financial markets recently. The persistence of coronavirus continues to weigh on the economic outlook and dampen global growth expectations. And a tightening regulatory backdrop in China and an uncertain geopolitical situation in Afghanistan only add to the current risk-wary environment.
The FX space has seen a near classic reaction unfold with the Japanese yen, Swiss franc and the US dollar all outperforming, while commodity currencies suffer amid low conviction and participation.
After printing several days of consecutive all-time high closes, the US equity markets have come back down to earth, albeit just a few percentage points off the tops. The richly valued S&P500 index current valuation sits around 22 times forward earnings, high by historical standards. But the enduring issue remains the breadth of the market with market risks still residing in the crowded tech sector.
The S&P500’s five largest stocks by market capitalisation are the well-known tech titans, which make up roughly 23 percent of the index. It is worth noting that the comparable figure at the peak of the dotcom boom in the early 2000s was 18 percent.
For market watchers who use technical analysis and charts to make investment decisions, the 15,000 level in the Nasdaq looks to be a key level which the tech-laden index is struggling to push above.
For sure, interest rates are still well anchored at low levels and supporting valuations, but a twitchy Fed on the move towards tapering and increasing worries over growth and supply constraints are acting as increasing headwinds to more gains.
Fragility has also been seen in gold, which has had an extremely volatile time over the past couple of weeks. After appearing to find support around $1,800 in July, the precious metal fell sharply after this month’s stronger than expected US jobs report. A second straight bumper non-farm payrolls number had sent the US dollar and US bond yields higher, never a good sign for commodities.
The weak close on the first Friday of the month then saw a “flash crash” with gold dropping more than 4 percent on the opening of the new week in Asia. Prices spiked down to a low of $1,677 on the back of extremely limited amounts of liquidity.
This type of volatility is not uncommon during the early hours of the Asian time zone. However, gold bugs have stemmed further losses with the Springtime lows from March and April acting as a reliable level of support.
Gold hasn’t been trading as it historically does recently. Falling bond yields have failed to boost the price, but their turnaround recently triggered a strong negative reaction. Indeed, flash crashes and capitulation like we have seen recently can signal that a major low is in place.
Softer economic data tempering Fed expectations plus the Delta spread hurting global growth and risk taking may also provide support to the precious metal in the near term.
Hussein Sayed, chief market strategist at Exinity Group.
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