A changing market environment, Interest Rates and a Gold bull...?
- 3 months ago
The market environment is changing its landscape, as of late most assets are currently on a downward spiral, mainly commodities such as Oil and Gas which both seem to struggle to make any considerable gains and it may be the case for some time.
And we may all have to just get used to it.
Touching on the stocks and the recent, and notable, wipeout of the Dow Jones Industrial Average and S&P 500 due to the market correction; most certainly indicates there are notable signs of weakness.
Regardless of the latest rally, where The NASDAQ keeps hold of its 2% YTD gain, the Dow is down 15% from its stellar highs.
Joining the tech companies, commodities such as oil may just be at a great price for consumers, nevertheless, that sentiment is not shared for the corporations as their earnings take a considerable slashing even with crude at an unstable $51 per barrel.
It would spell carnage but it may be a bit too late for that, oil prices down significantly from the October peak, the yield on the high-yield energy index jumped to a 24-month high of 7.99%earlier this month, however the State Street SPDR Energy Select Sector ETF (XLE) is down roughly 10% for the year.
All of the above may just be an indication that people are holding back on selling, but for how long?
We must of course not forget the implications of rising interest rates on cosumer behavior.
While the worst performing stocks are certain to be kept in the dark, consumers in the U.S. are being left out due to the housing price growth and mortgage rates, after all homebuilder's sentiment is at its lowest since August 2016 and the data strongly supports these points
Automakers are fairing no better, given in consideration GM's latest announcements in Canada, which is to cancel numerous models due to its global restructuring and along with that shut down several assembly plants, which has even drawn criticism from Trump himself.
Nevertheless this particular move affects 15% of its salaried workforce.
With mortgages, energy bills and food to be provided all of the aforementioned may cause a struggle to make ends meet and all in the name of raised interest rates as it seeks to balance some financial normality.
The Gold Bull won't be alone..
Despite a rising interest rate environment and a 6% year-to-date decline in the gold price ther seems to be bullish sentiments on gold and mining companies.
If there is one positive to be taken out of the Fed's decision to raise rates, it is that usually gold tends to go up, paired with the rally that takes place in the middle of December as the COMEX ( Commodity exchange) delivers its statement.
Let us not also forget that in times of crisis gold has been the haven most seek to shelter under, and if things are already looking gloomy with trade wars between the U.S. and China it would make perfcet sense to do so.
Source: Smart Trend Team