Gold 12 May
Today we have Exports and Imports.
This data is very important since it allows you to calculate GDP: GDP = Consumption + Investment + Government Spending + Net Exports.
Yesterday data came out mixed so I ended up not taking any trades.
ALSO:
(data gathered over many sources)
The CME FEDWatch Tool which tracks the probabilities of rate changes implied futures trading data, indicates that investors believe that there is about an 95% chance of them not changing the rates at the June monetary policy-setting meeting of Federal Open Market Committee. Staying with those odds for now, maybe it’s time to start thinking “what happens when the Fed is done hiking”. The problem is the FEDs playbook has had many different chapters over the history of rate rise cycles. Be mindful of the fact that the sample size is relatively small at 14 main rate rise cycles since the S&P 500’s inception in 1928. That suggests caution around thinking there is a consistent pattern to apply to investment decision making.
It is indeed possible to predict an average trajectory of the S&P 500 from six months before the final rate rise of each main cycle out to the following year. Focusing only on the average would suggest a pattern of weakness leading into the final rise, some strength in the immediate aftermath, and then a significant sell-off out to about 100 trading days after the final rise.
There is not a pattern between the date of the final rise and the S&P 500 performance at the six-month and one-year point. Also the span between the final rise and the subsequent first rate cut. This highlights that there are always myriad influences on market behaviour and not just monetary policy. But it also reinforces one of our favourite things: Analysis of an average can lead to average analysis.
In the immediate aftermath of the Fed’s announcement in early-May, I saw several headlines that flashed something along the lines of, “typically, the final rate hike has been a positive for stocks”. The problem is that there is no “typical” when it comes to this analysis. In fact, the pattern associated with the average trajectory of stocks actually never occurred during any individual cycle! This rate rise cycle has already been particularly unique relative to the past three cycles. Last year, stocks got crushed during the first six months of the rise cycle; in contrast to the previous three main rise cycles (2015-2018, 2004- 2006, and 1999-2000), when stocks rallied during the rising phases.In the immediate aftermath of the Fed’s announcement in early-May, I saw several headlines that flashed something along the lines of, “typically, the final rate hike has been a positive for stocks”. The problem is that there is no “typical” when it comes to this analysis. In fact, the pattern associated with the average trajectory of stocks actually never occurred during any individual cycle! This rate rise cycle has already been particularly unique relative to the past three cycles. Last year, stocks got crushed during the first six months of the rise cycle; in contrast to the previous three main rise cycles (2015-2018, 2004- 2006, and 1999-2000), when stocks rallied during the rising phases
In the immediate aftermath of the Fed’s announcement in early-May, I saw several headlines that flashed something along the lines of, “typically, the final rate hike has been a positive for stocks”. The problem is that there is no “typical” when it comes to this analysis. In fact, the pattern associated with the average trajectory of stocks actually never occurred during any individual cycle! This rate rise cycle has already been particularly unique relative to the past three cycles. Last year, stocks got crushed during the first six months of the rise cycle; in contrast to the previous three main rise cycles (2015-2018, 2004- 2006, and 1999-2000), when stocks rallied during the rising phases.
Yes, there were winning years following the final rate rise, including 1995, 2018 and 2006. In the case of 1995, when stocks rallied 32 per cent after the final Fed rate rise, it was partly tied to the historical rarity of an economic softlanding; but it was also in the midst of the secular bull market from 1982 to 2000.
In 2018, the Fed was able to pivot to rate cuts; but unlike now, it was not battling a 40-year high in inflation. Stocks performed well following the final rate rise in 2006, gaining 16 per cent one year after the last rate rise; but as we all know from painful experience, it was a reprieve only be squashed by the global financial crisis.
In fact, the stock market peaked in less than a month following the first rate cut in September 2007. This was also in the midst of the secular bear market from 2000 to 2009.
All in all the cycles don’t represent proxies for the current environment and the the hope for end to the Fed’s most aggressive monetary tightening campaign in four decades may be in sight. But equally assumptions about it representing a good and additional risk may be too complacent. In this anything-but-typical cycle, be wary of “typical” commentary when it comes to market behaviour.
SO:
I won’t be trading today cause its Friday
I don’t mind waiting for good trades so I might skip days because I’m managing portfolios, preparing clients or I think it’s not worth. I keep alerts on investing.com and terminals, always flag the data you need and make sure you only need to be there for it. The more you look at the chart the more impatient you will be, as a trader most of your job is to read ad take decisions, skipping a day can be more profitable than risking.
Its Friday so be careful and if possible don’t trance since there are more days and its better not to lose money than to lose money.
Have a nice weekend guys, enjoy.
This data is very important since it allows you to calculate GDP: GDP = Consumption + Investment + Government Spending + Net Exports.
Yesterday data came out mixed so I ended up not taking any trades.
ALSO:
(data gathered over many sources)
The CME FEDWatch Tool which tracks the probabilities of rate changes implied futures trading data, indicates that investors believe that there is about an 95% chance of them not changing the rates at the June monetary policy-setting meeting of Federal Open Market Committee. Staying with those odds for now, maybe it’s time to start thinking “what happens when the Fed is done hiking”. The problem is the FEDs playbook has had many different chapters over the history of rate rise cycles. Be mindful of the fact that the sample size is relatively small at 14 main rate rise cycles since the S&P 500’s inception in 1928. That suggests caution around thinking there is a consistent pattern to apply to investment decision making.
It is indeed possible to predict an average trajectory of the S&P 500 from six months before the final rate rise of each main cycle out to the following year. Focusing only on the average would suggest a pattern of weakness leading into the final rise, some strength in the immediate aftermath, and then a significant sell-off out to about 100 trading days after the final rise.
There is not a pattern between the date of the final rise and the S&P 500 performance at the six-month and one-year point. Also the span between the final rise and the subsequent first rate cut. This highlights that there are always myriad influences on market behaviour and not just monetary policy. But it also reinforces one of our favourite things: Analysis of an average can lead to average analysis.
In the immediate aftermath of the Fed’s announcement in early-May, I saw several headlines that flashed something along the lines of, “typically, the final rate hike has been a positive for stocks”. The problem is that there is no “typical” when it comes to this analysis. In fact, the pattern associated with the average trajectory of stocks actually never occurred during any individual cycle! This rate rise cycle has already been particularly unique relative to the past three cycles. Last year, stocks got crushed during the first six months of the rise cycle; in contrast to the previous three main rise cycles (2015-2018, 2004- 2006, and 1999-2000), when stocks rallied during the rising phases.In the immediate aftermath of the Fed’s announcement in early-May, I saw several headlines that flashed something along the lines of, “typically, the final rate hike has been a positive for stocks”. The problem is that there is no “typical” when it comes to this analysis. In fact, the pattern associated with the average trajectory of stocks actually never occurred during any individual cycle! This rate rise cycle has already been particularly unique relative to the past three cycles. Last year, stocks got crushed during the first six months of the rise cycle; in contrast to the previous three main rise cycles (2015-2018, 2004- 2006, and 1999-2000), when stocks rallied during the rising phases
In the immediate aftermath of the Fed’s announcement in early-May, I saw several headlines that flashed something along the lines of, “typically, the final rate hike has been a positive for stocks”. The problem is that there is no “typical” when it comes to this analysis. In fact, the pattern associated with the average trajectory of stocks actually never occurred during any individual cycle! This rate rise cycle has already been particularly unique relative to the past three cycles. Last year, stocks got crushed during the first six months of the rise cycle; in contrast to the previous three main rise cycles (2015-2018, 2004- 2006, and 1999-2000), when stocks rallied during the rising phases.
Yes, there were winning years following the final rate rise, including 1995, 2018 and 2006. In the case of 1995, when stocks rallied 32 per cent after the final Fed rate rise, it was partly tied to the historical rarity of an economic softlanding; but it was also in the midst of the secular bull market from 1982 to 2000.
In 2018, the Fed was able to pivot to rate cuts; but unlike now, it was not battling a 40-year high in inflation. Stocks performed well following the final rate rise in 2006, gaining 16 per cent one year after the last rate rise; but as we all know from painful experience, it was a reprieve only be squashed by the global financial crisis.
In fact, the stock market peaked in less than a month following the first rate cut in September 2007. This was also in the midst of the secular bear market from 2000 to 2009.
All in all the cycles don’t represent proxies for the current environment and the the hope for end to the Fed’s most aggressive monetary tightening campaign in four decades may be in sight. But equally assumptions about it representing a good and additional risk may be too complacent. In this anything-but-typical cycle, be wary of “typical” commentary when it comes to market behaviour.
SO:
I won’t be trading today cause its Friday
I don’t mind waiting for good trades so I might skip days because I’m managing portfolios, preparing clients or I think it’s not worth. I keep alerts on investing.com and terminals, always flag the data you need and make sure you only need to be there for it. The more you look at the chart the more impatient you will be, as a trader most of your job is to read ad take decisions, skipping a day can be more profitable than risking.
Its Friday so be careful and if possible don’t trance since there are more days and its better not to lose money than to lose money.
Have a nice weekend guys, enjoy.
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