Morning Report Wednesday 3 September 2014
Gold and Oil are smacked as the US gets more great economic data, it’s a very tricky puzzle!
The US Federal Reserve and the Bank of England are expected to raise interest rates next year, as the ECB (European Central Bank), Japan and China are all expected to inject fresh various degrees of stimulus into their respective economies. Arguably, we have never found ourselves in a more tricky set of unfolding economic circumstances, characterised by poor economic news being taken well by equities e.g. Last night US Manufacturing data showed expansion at the fastest pace in three years, but the Dow fell 0.2%. US equities have rallied 87% since October 2011, significantly aided by “free money” being pumped into the system; this stimulus is about to get reduced, and then turned off - this cannot help equities. The S&P500 has not had a decent pullback for 3 years (over 1,000 days). I am confident we will see two 10% retracements in US equities in the next 12 months, the question is identifying when and the levels to start buying. Completing the current economic puzzle is very tricky but some parts are relatively clear and should not be ignored:
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