Optimism over a
strong holiday sales season and a slight recovery in Oil prices helped to boost
the oversold market. However, President Trump’s comments to The Wall Street
Journal saying that he’s still likely to increase tariffs on $200 billion of
Chinese goods and slap tariffs on the remaining $267 billion of imports will
likely complicate markets further.
The global
economy is in a desperate need to end the ongoing trade dispute between the two
largest economies. Already we’ve been seeing many signs of economic slowdown in
Emerging Markets, Europe and even in the U.S. Investors are likely to become
more concerned that the G20 summit in Argentina kicking off on Friday won’t
lead to a truce or a framework agreement between China and the U.S., but given
that we’re living in a Trump world, there’s always a chance for last minute
changes. Until then expect markets to remain choppy.
Investors will
be focused on Fed talks this week with Fed Vice Chairman Richard Clarida due to
speak later today followed by Fed Chair Jerome Powell tomorrow. The overall
economic outlook has changed significantly compared to just a couple of months
ago. Oil prices declined more than 30% from their peak suggesting inflation may
slow down; equity markets entered correction territory hitting wealth; and dark
clouds are gathering over the U.S. housing market. I think the Fed has now
enough reasons to adjust the pace of tightening policy, but investors need
confirmation from policymakers.
The 3% recovery
in Oil prices yesterday seemed to be short-lived with both major benchmarks
declining slightly today. It will be difficult to know where prices will be
headed next unless we know the outcome of the G20 summit and OPEC’s annual
meeting on December 6. Finding a new normal is likely to be a difficult task in
the weeks to come.
In the
Cryptocurrency world, traders are no longer worried about price movements as
much as the fate of these currencies. A fall from almost $20,000 to below
$4,000 in Bitcoin’s price is a complete crash. Some may say that we had seen a
similar correction before when prices dropped from $1,150 in December 2013 to
below $300 more than a year later. However, the difference between then and now
is the market cap. Back then investors and speculators may have lost nine
billion dollars. However, this year’s move has wiped out more than $250 billion
from its peak.
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