Rainer's Investment Insights

The way the markets performed in the last two weeks is even less remarkable than I thought it would be. Over the last few months, I said not to expect too much from the "Santa Rally" in equities this year.   Now, the arguments fly whether this is the start to a January correction, or whether the weakness of the last two trading days is just the market taking a breather and the next rally is just around the corner.  Using technical analysis, the shorter-term analysts insist that we will see more upside first, basing it on various indicators, while the medium to long term analysis projects more selling pressure ahead.   Since it is NEW YEAR's EVE today, I only have about an hour before 'my shop' closes and the time comes to switch my attention to family matters, visitors and a bucket full of crackers. I also don't want to bore your first few moments in the NEW YEAR with an analytical essay that may need to be rewritten a week later... No Change To Tenta

FED Rate Hike: A Boon Or A Curse? Probably neither: The last 5 trading days are best described as  aberrations of human behaviour. T he price gyrations in financial markets have been extreme, trading volumes huge, mostly denoting the reactions of ill advised punters.  During the last 8 months, asset prices had been adjusting in anticipation of a rate hike of 0.25%. When it was announced on the December 16th, some punters thought a new rally is starting. After all, it had been 7+ years since the last rate increase and surely, the economy looks strong enough to warrant it. Three days later, a counter sentiment created massive selling pressures, and global market indices returned to square one, most of them.   World Indices S&P500, Dec '15 correction and short term outlook; source: Chartnexus Actually, the turning moment came on Monday,  the 14th, late in the day and - two days  BEFORE the rate increase was announced. To me the subsequent bounce looks more like

Weekly Brief (Nov 30 to Dec 4) Wasn't the week a barrage of conflicting messages and events! Volatility in financial markets picked up steam though hardly in logical consequence to the news. Correlation between assets and markets became close to 100% in US and Europe: as stock prices rose, yields rose, too, as did gold and silver prices, at least the last 2 days of the week. In Asia, however, markets moved in range, almost unperturbed by the hectic in developed world. Equities in US & EU The week started off with US and EU  equities  drifting gently lower, then a boisterous upswing on Tuesday, December 1st, yet erasing it on Wednesday. Thursday brought more downside and traders braced themselves for a negative weekly return. But on Friday, equities rallied strongly, ending the week close to the levels where it began.  Bonds US Bond yields had been falling for almost a month, yet on Thursday, they rose 20 basis points for the 10-year Treasury bill, dropping bond p

Asian Equities Suffer Despite the obvious technical analysis divergence I spoke of in  my last post , equities in Europe and the US have been rallying again following the harrowing terrorist attacks in Paris. Asian equities did not share the same positive momentum.  There are the obvious reasons, like  a strong USD acts as a magnet for moneys from all over the world. Why invest in a country with an uncertain investment environment when you can have USD safely and - hopefully with a little more interest to boot. USD investors will sell overseas holdings and return to the US in search of investment opportunities. (At some point, the strong dollar will flow into foreign lands again to buy bargain Asian assets. That point is in the distant future!) The currency war is by no means over, and Asian currencies suffer tremendous volatility.  But there are also country specific factors, which add to the conundrum.  Let's look at some of the bigger Asian country indices:  China

“World equities have peaked!” In the terrible aftermath of the Paris bombing, I read some commentators referring to the rally since last Monday as a "Patriots' Rally". I am not sure whether this term really is in use, and I can't quite imagine a Patriots' Rally to go round the world! Could someone really be considering a stock market rally as a viable battle strategy against DAESH / Islamic State? And why does the media still indulge the black flag guys by honouring the name they have given themselves? DAESH denotes who they are.  Be that as it may, since that dreadful Friday, global equity markets have been rallying as has the USD. But a continuation beyond today is hard to visualise when you look at the odds stacked against it. Some three weeks ago, I said the rally is almost dead and that in the coming weeks equity trading would be range-bound at best. My portfolio switched to safety on November 5th, one trading day after the global equity peak. I

US equities have peaked, … but before I pronounce the rally dead – and hail the start to a significant bearish phase, we ought to check how global equity indices have performed in the last 6 months and see if the price structures point to where the markets are headed next.   Santa Rally still to come? I want to pour a little water on the torches of the “Santa-rally-comes-early” torch bearers. Here is a cockeyed comment I had in my inbox this morning: “Should we worry whether the Santa Rally is on for 2015 or not?” it asks. And then goes on to insist that “the short term considerations don’t matter for the long-term investor and his investment goals.” HELLO, this is “My-Diesel-is-Clean” talk and we know what happened to those talkers next. The above chart tells us that Santa’s returns vary greatly depending on the actual period t (t= year end. t+1 then is 1 day to year end, t+2 means 2 days to year end, etc.), and the number of years. The fact that the period after 19

September 29th was indeed a major turning point in global financial markets, +/- 1 day.  That was my target date, so predicted in my previous post.  From those low levels, markets moved sharply, some even returning to previous highs.  USD goes soft Having started on September 29, and recording its first peak on October 8th, this well supported equity rally was accompanied by a weakening US dollar (-3% against global currency basket) as more and more investors convinced themselves that the FED would not raise interest rates until next year. It is important to see the US stock performance in this light, too, especially if you normally place your investment in EUR or some Asian currencies like the Singapore Dollar (*SGD), all of which saw their local currencies strengthen.  Curiously, I noted that USD investors quickly switched to Asian equity and - gold funds in the last week of September, thus avoiding the trap of remaining stuck in a weakening dollar environment. It is also the