September 13, 2015
Weekly Market Outlook
By Keith Schneider
After mostly sideways action, US stocks ended the week on a positive note with the S & P 500 up .64%, although still down about -5% YTD and the leading index the NASDQ 100 up 2% for the week and just above where it started in 2015.
Keep in mind that the NASDQ 100 is the strongest index, and although up for the week is still wobbling around in a distribution phase. Overall one would be hard pressed to find an equity index on our planet that is looking robust. Brazil and China are jockeying for position for worst performance over 3 and 6 month periods.
No question, equity markets around the world are under pressure and in a sea of red. September and October have historically been the toughest for the stock market and with the trends pointing down, everyone is on edge.
So the 64 trillion dollar question is will she or won’t she? That is, will Yellen raise or not. The economic reports on the US economy remains strong but deflation remains a threat with the Chinese economy grinding to a halt (relatively speaking) and its crushing impact on commodity prices.
Commodity dependent Brazil is getting hammered with its stock market down over 30% over the last six months with its bankers ripping their hair out, enduring their very own painful form of a Brazilian wax job.
So, with Volatility at levels not seen since the crash in 2008,
what’s a girl to do?
Not raising rates could be viewed as an acknowledgement that the global economy cannot handle a rise by the Fed and shine a light on how fragile things are, while raising rates could dislocate markets used to the flood of money by central banks yet struggling with deflation, never-mind inflation.
Of course the markets could take the fed holding off as a positive, but that is not a given either. Going somewhat counter to all this is emerging market debt (PCY) that has staged a very strong comeback since getting hit along with just about everything else in late August.
Stepping back...
The mini crash in late August begs one to ask the question, have the fed and central bankers lost control?
The market crash in China has highlighted the fact that the strange marriage of a state managed economy led by a communist party playing in a western dominated global financial system has hit its limits.
Certainly the Chinese government has tried everything, but they are quickly learning that even Houdini couldn’t levitate their markets, so they are calling on the largest US money manager BlackRock’s CEO to help.
The jury remains out as even the most experienced capitalists are in need of a good magic trick.
Fortunately for you and me, we can simply trade whatever the market’s reaction turns out to be. And to that end, check out this week’s video as we highlight some key reference points that can be used to profit from regardless of the result of the Fed’s magic trick!
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