Today’s Key Market Drivers: 15th August 2019
Wipeout! Dow Jones and S&P 500 suffered their biggest falls of the year.
US stock indexes suffered their biggest one-day declines of 2019 with the S&P 500 and Dow Jones down 3% as recession fears gripped traders on Wall Street. It’s wasn’t a piece of economic data that spooked traders, nor was it a comment from a Chinese or US trade official. It was simply a piece of financial market history that saw traders hit the sell button harder than any other day this year.
Historical data shows that when the 10 Year Bond Yield goes below the value of the 2 Year Bond Yield the US usually has a recession. It’s a bit like saying when the clouds get really dark, there is a reasonable chance but not a certainty that it will rain. History shows that since 1978 there have been 5 occasions the 10-year yield has fallen below the 2-year yield and on each occasion, a recession followed. BUT, according to Credit Suisse “a recession didn’t occur until 22 months later and the S&P 500 actually enjoyed average returns of 15% 18 months after an inversion, before it eventually turns.”
The last time a 10 Year Yield crossed over the 2 Year Yield was in 2005 and it wasn’t until 2007 we saw a recession start to grip the United States.
Wednesday’s sell-off was not helped by the weaker than expected China trade data with the Yen and Swiss Franc the big winners as traders piled back into safe-haven assets. Anyone trying to chase these currency prices higher and lower over the past 10 days would have highly likely had their fingers severely burned.
Trumps calls Fed President Powell “Clueless”.
Donald Trump let rip again Wednesday telling followers on this Twitter feed that the US Federal Reserve Chairman was “clueless”. Trump wants lower interest rates because he knows it will boost the stock market and keep the economy artificially inflated until after the next election.
Don’t be fooled, the President has self-interest written all over him and his cheap shot at the US Fed is just another example of the kind of person Donald Trump really is. Disrespectful is one word that immediately jumps to mind. He personally chose the US Fed Chairman as a captain’s pick for the Fed and now takes no responsibility for his decision.
Aussie Unemployment numbers due at 11.30am AEST today.
Yesterday’s wages index number met economists estimates at 2.3% and failed to move the Aussie Dollar through the Asian trading session. Today at 11.30am we will get the July jobs numbers and official unemployment rate which is expected to stay at 5.2%.
The market is expecting 14,000 jobs to have been created in the month of July so if the unemployment rate and jobs number is either side of estimates expect to see the AUD sold off or bought back up if the news is positive.
Warning! Beware of the Asian Trading Session.
Yesterday I released a video on why it’s important that you understand how investment banks and hedge funds view the Asian trading session and some tips on how to avoid dusting your money through the lowest volume trade period in the markets. If you haven’t yet had a chance to watch it the video is below.
US Retail Sales data will be closely eyed today.
No doubt the market will be closely watching today’s official US Retail Sales number for any sign of US consumers spending less and thus giving the press more opportunity to spook investors that a recession is on the way. The US economy is the most resilient economy in the world and it’s also the largest when it comes to consumption and today’s retail sales number coming only 24 hours after “recession warning bells” started to ring will be just another piece of economic data the so-called experts will try to dissect into a news story.
I have one simple rule of thumb when it comes to listening and taking advice from people. If you walk the walk, if you risk your money in the markets and are successful then I am willing to listen to your views on financial markets. If you are a “talk the talker” a journalist, an economist or just someone who likes to have an opinion (which you are entitled to have) on markets but don’t take risk and make money then I’m sorry I have no interest in hearing what you have to say. Listen to those who take risk and are successful at doing it. Ignore the rest as most of them including financial planners, brokers and fund managers are simply full of self-interest and most of them have no clue what they are talking about.
Plenty of data was released on Wednesday and some of it surprised to the upside.
The Aussie Dollar moved back lower through the Asian trading session as Chinese Retail Sales and Industrial Production numbers missed estimates. The Euro remained reasonably steady following the release of Euro Area GDP which met the markets estimates.
What was a pleasant surprise was the better than expected UK Inflation data which may give the Bank of England reason to hold off on dropping the official UK interest rates in coming months, although I do hold the view Brexit will be the trigger point for a rate cut in October from the BOE if a trade deal between the EU and UK leaders is not done.
You did not wake up today to be average. Get after it and don’t make excuses. EVER!
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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