News

19.09.2022 – The yen continues to weaken unchecked. Which is due to the negative interest rate – Japan is the lone proponent of the ongoing flood of money. The question of all questions for the yen: Will the Bank of Japan change course or not?

How low can you go? The yen weakens unchecked, USDJPY runs up as if on rails. See our daily chart with the 50-day line. The yen has just marked its weakest level against the dollar in over two decades. Since 1998, to be exact.

Source: Bernstein Bank GmbH

No wonder: while the U.S. Federal Reserve is spiritedly implementing its interest rate turnaround, the Bank of Japan has kept its key rate at minus 0.1 percent since 2016. The Japanese central bank has instead opted to freeze the yield on ten-year Japan Bonds at around 0.25 percent. We are curious to see how the Bank of Japan positions itself at its next interest rate decision on September 22.

Tentative verbal intervention
The market has just taken notice. That’s because Hirokazu Matsuno, Japan’s top cabinet secretary, stated that the government is prepared to make any decision possible to stabilize the Japanese yen. The market has so far been unimpressed by the announcements and quickly shrugged off the verbal intervention.

Possible capital repatriation
But for the financial blog “ZeroHedge”, the current upward trend will soon be history. Japan is a net capital exporter, wants domestic investors increasingly invested abroad. Domestic investors had bought many foreign assets, international investors had held back in Japan. In addition, rising energy prices were causing an outflow of capital. In normal times, the weak yen would boost exports. However, imports had recently outweighed exports. Furthermore, tourism had slumped in the wake of Corona. Which could change now, however. We add: The same applies to exports – if the import situation stabilizes together with Corona in the rest of the world, cheap and high-quality Japanese goods could be in demand. Home electronics, cars, whatever.

The catapult
Thus, the yen could become a catapult, “ZeroHedge” continued. Any domestic crisis could immediately cause money to be repatriated. And with a net international investment position of the equivalent of $3.5 trillion, that would lead to a violent yen rally. To which we wonder what crisis that might be.

No inflation to speak of
Our countervailing view: Until the decades-long slump in Japanese productivity is eliminated, interest rates in Japan are unlikely to rise. This is because higher interest rates would weaken borrowing and slow economic performance. Furthermore, Japanese have no problem cutting back in times of rising inflation. Especially since the inflation rate on the Nippon is only 2.6 percent anyway. Therefore, things could well get worse for USDJPY from the bulls’ point of view: In the early 1970s, the yen stood at around 350 to the dollar.

Jesper Koll, a director at investment boutique Monex Group, also sees the yen heading for 150 to 160. Koll, speaking to CNBC a few days ago, saw two powerful forces at work: the widening of the interest rate differential with the U.S. and Japan’s current account deficit. The development of the currency is textbook and predictably based on fundamentals.
Again, it remains to be said that the Japanese central bank could surprise the stock market. Shorties could then be caught on the wrong foot. On the other hand, the expected turnaround could take forever. We hope that you are right in weighing the arguments. Bernstein Bank is keeping an eye on the situation for you!

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

15.09.2022 – The crypto world breathes a sigh of relief: The Merge has happened. The Ethereum network switched from Proof of Work to Proof of Stake tonight. Which should save a lot of energy. And could make Ether the preferred e-currency of all ecologically concerned investors. Now what? Well, the whole thing is a bit reminiscent of Y2K hysteria: little has happened so far. Which is not such a bad thing.

So far, the Ether price has hardly reacted to the big event, as the four-hour chart shows. Apparently, traders and investors are waiting to see whether everything will really go smoothly in the coming days and weeks. Moreover, the recent sell-off in the stock market in the wake of the US inflation data and the subsequent interest rate scare has also created a risk-off sentiment in e-denominated currencies. Perhaps most traders have not even noticed the event.

Quelle: Bernstein Bank GmbH

What happened: The blockchain network pulled off the biggest and most ambitious software upgrade in the crypto world tonight, according to news agency Bloomberg. Co-founder Vitalik Buterin announced the deal on Twitter a short while ago. The Merge is a fusion of the existing blockchain with a parallel network, the Beacon Chain, on which the Proof of Stake concept was tested. Put simply, it means that the entire computing process involved in the creation of a token is no longer documented in the blockchain. Instead, only the existence is documented.

Massive energy savings
With a successful conversion, mining Ether should save an incredible 99.95 percent of energy, as the Ethereum Foundation estimates. In times of exploding electricity costs, this is certainly a plus for investors. Especially for large investors who invest in an ecologically correct way. In addition, the network is supposed to run faster. In addition, tokens are to be taken off the market.

Crypto yield
And another advantage: with the transition to Proof of Stake, there are now better ways to “stake” ETH, according to the website Blockchaincenter.net. In simplified terms, this means that investors virtually bind themselves to the cryptocurrency via a derivative. In return, the staker receives a reward in the form of newly created Ether, which, according to the Ethereum Foundation, results in a return of 4.1 per cent per annum. According to the website Staking Rewards, the return after the merge is even 5.2 per cent. Tokens from scammers are to be eliminated.

Anxious look ahead
The interesting question now is whether cyber gangsters will not increasingly strike. “Cointelegraph” named the three biggest threats: Fraudulent staking pools, upgrade scams and fake airdrops – which are supposed gifts in the form of cryptos. Another concern in the community is the appearance of copies such as EthereumPOW. Multiple versions could cause confusion. The question is also whether the new system really runs smoothly. Or whether there are technical glitches.
For example, the Coinbase Global exchange has frozen Ether transactions as a precaution, among other things, for fear of hacker attacks. The crypto exchange Aave stopped lending before the merge. Unwanted incidents are likely to torpedo the ETH exchange rate. Conversely, if there is a technical success, it could soon go steeply up. So stay alert and keep an eye on the real-time news – Bernstein Bank wishes successful trades and investments!

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

14.09.2022 –Surprise: Inflation in the USA rose more sharply in August than analysts had expected. Now, interest rate fears are once again sweeping the trading floor. No – the interest rate panic. High-tech stocks in particular went down after the CPI. And the dollar fizzled away.

But, but – how can that be? So close to the midterms, a Democratic administration is cooking up a hard-to-digest soup for the Democrats. In August, the inflation rate in the U.S. was 8.3 percent. Still, a small drop from 8.5 percent in July and from 9 percent in June. However, almost all economists had expected a lower value for the Consumer Price Index. After all, the U.S. Energy Information Administration had reported that gasoline prices had fallen by 12.8 percent in August. This drop alone contributed to a 0.7 percentage point reduction in inflation. Analysts had therefore estimated the annual inflation rate in August at an average of 7.8 percent. But things turned out differently.

Almost all analysts were wrong

Only the Bank of Montreal hit the nail on the head with its forecast of 8.3 percent – 47 out of 50 economists were wrong. This caught many traders on the wrong foot, who had expected only a moderate inflation trend and a rally on the stock market. The reaction on the market: mainly interest rate-sensitive high-tech stocks down, dollar up. The picture shows the four-hour chart of the Nasdaq 100. A real bloodbath – we hope you were right with your trades.

Source: Bernstein Bank GmbH

The details are also not pleasing for bulls on the stock market. The Consumer Price Index rose 0.1 percent month-on-month, while an average of minus 0.1 percent had been expected. The core rate, which is particularly watched by the Federal Reserve, rose 0.6 percentage points, twice as much as expected. We are thus experiencing the 27th consecutive month of higher inflation. The 6.74 percent year-over-year increase in rents, in particular, is likely to raise gray hairs among Dems – this is the highest rate since the early 1980s and is not likely to go over well at the ballot box at all.

The Fed will react

The Japanese investment bank Nomura commented: “We saw this tug of war between goods moderating and services remaining strong. This is not a tug of war. They both moved up. (…) This is no good news across this report.” The conclusion from all this is that the Federal Reserve is likely to raise interest rates significantly next week. The market has 75 points completely priced in. Discussions on the floor, however, are now already 100 basis points. This poses the risk of an excessive cooling of the economy – a soft landing seems questionable. Bernstein Bank is keeping an eye on the situation for you!

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

13.09.2022 –Topsy-turvy world: The dollar is stronger than it has been for a long time. Because of the Federal Reserve’s interest rate turnaround. And now, of all times, some forecasters are calling for a short trade. Because of the Federal Reserve’s interest rate turnaround. We shed light on the background to the surprising turnaround.

Corona crisis, Ukraine war, higher interest rates in the U.S. than in Euroland: the greenback has served as a safe haven for many investors for quite some time. Investors are fleeing the emerging markets in particular. And since the energy crisis in Europe is likely to hurt domestic industry, we have another argument pro dollar and contra euro. Here EURUSD in a weekly chart.

Quelle: Bernstein Bank GmbH

But wait – suddenly there is a new assessment of the situation by some analysts. Surprise: Dollar short could become enormously lucrative. Because the political costs of raising interest rates are too high. So those who are betting on a further slide of various currencies against the dollar could be wrong.

Beware of bear traps
On that note, Lawrence ‘Larry’ G. McDonald has just spoken out, he is a best-selling author and founder of ‘The Bear Traps Report’. This is an investment newsletter focusing on the macro perspective. McDonald points out a rarely highlighted fact: Currently, he says, the Fed is secretly, quietly, paying about $250 million to a few banks – on a daily basis.
The reason: For 14 years, financial institutions have been forced to avoid risky investments in the course of risk reduction; this is called deleveraging. Instead, they have increasingly invested in U.S. bonds. And here we have landed on the subject of the dollar short: As interest rates rise, the Fed would have to pay these banks more and more money for coupons. And the Fed would soon incur losses. No wonder with an increase from 25 to 325 basis points in a few months – and who knows where the Fed Fund rate will stop. McDonald called the social cost of tightening rates and redistributing wealth too high.

Trade of 2023
In the same vein is a statement by Michael Hartnett, who has been quoted here several times, that is one of the best analysts on Wall Street. The chief investment strategist at Bank of America recently called out the top trade of 2023: Dollars short and long in emerging market assets, global addresses in the UK, internet stocks in China and in gold miners. But that’s only after the US recession begins – these will signal the peak in the dollar; and also only after the economic trough in China, which will likely be accompanied by a devaluation of the yuan. Specifically, Hartnett’s Top Trade 2023 looks like this: “Our high conviction – U.S. dollar bear basket is locked and loaded – EWZ Brazil, EEM Emerging Markets, FXI – KWEB China, global value names in EMU and gold miners GDX.” Where the abbreviations stand for index funds.

Risk of Overtightening
Indeed, Fed Vice Chair Lael Brainard has just fueled such thinking: “There’s a risk of raising rates too much.” She referred to the “global nature…. risks with overtightening.” We wonder if the experts are right, and if the Fed actually has in mind moving away from tightening so as not to send the economy into recession by twisting off cheap money. If the banks cash out while millions of people go into unemployment, that would be explosive indeed. Things remain exciting – Bernstein Bank is keeping an eye on the situation for you!

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

08.09.2022 –It is not the delivery of the smallest quantities of war material to Ukraine that is the German turning point. It is the de-industrialization of the Federal Republic. This will have consequences for the DAX. Because now it’s all about the substance.

The country has just experienced a turning point. The philosopher and children’s book author, who plays the role of economics minister, let the mask fall. On Sandra Maischberger, Robert Habeck confirmed that he wants to implement the green-red planned economy. In view of the high energy prices, he recommended that craftsmen, traders and manufacturing companies simply stop using energy so that they don’t slide into bankruptcy. So the economy should simply stop doing business.
Bio-death of industry
Make no illusions: This is program and has been planned for a long time. Germany is to be transformed into an organic paradise where only the bare necessities are produced. Without large-scale industry with all its emissions. Unfortunately, this threatens a veritable wave of bankruptcies. The DAX – here in the daily chart – should react to this.

Source: Bernstein Bank GmbH

What all is at stake and how tense the situation already is, you will hardly read in the green-left German mainstream media. For that, the brilliant blog “Publico” has just compiled a depressing list.

List of horror
The Indian steel company ArcelorMittal, for example, has cut production in Hamburg and Bremen to zero for the time being; at Arcelor in Eisenhüttenstadt, Brandenburg, employees have to work short hours. The wind turbine manufacturer Nordex is closing its plant in Rostock completely (relocation to India), as is the French steel group Vallourec with its Düsseldorf and Mühlheim sites; furthermore, the tile plant of Villeroy & Boch in Merzig, Saarland (relocation to Turkey), Ford in Saarlouis (continuation of production in Valencia) and the automotive supplier Mahle in Gaildorf, Baden-Württemberg. Hakle in Düsseldorf had to file for planned insolvency due to energy and raw material costs. The planned closure and relocation of no less than three plants of the automotive supplier Kostal in the Sauerland region is not only about the high energy costs, but also about the ailing highway bridges in the Sauerland region. We add: In the meantime, shoe retailer Görtz has also filed for insolvency. Consequential costs of inflation – people are saving to be able to afford electricity and heating.

Imminent blackout
This could be just the beginning. Germany still has three nuclear power plants on the grid, two of which are to be eliminated and retained only as an emergency reserve – although the rapid ramp-up could become critical because of lead times. Three nuclear power plants were shut down in 2021, and the intact reactors will remain so. As a result, Germany is completely dependent on French nuclear power and also on coal-fired power from Poland or the Czech Republic. Whereas Paris will first supply domestic industry with cheap nuclear power when things get serious. According to “Publico”, even a filling level of the German gas storage facilities of 100 percent means nothing, because that corresponds to just a quarter of the German gas demand. So far, the country has always lived simultaneously on the storage reserve and Russian gas from the pipeline in winter, the only support for the planned nuclear-free energy turnaround. In other words, Angela Merkel has handed Germany over to Moscow.

Threat of capital flight
The conclusion to be drawn from all this is that international investors will think very carefully about where they invest their money. Probably not in a country that is destroying itself with its eco-geekiness. At any rate, Habeck made it clear after the government meeting in Meseberg that he doesn’t care about the impending collapse of industry – in that case, the state will step in with money for short-time workers. If the feared blackout occurs in winter, the DAX is likely to react.
Perhaps sanity will return and the government will change or the energy transition will be reversed. Or the decentralized production of energy will miraculously succeed – solar plants, wind turbines. Or industry will soon be allowed to increasingly use its own small power plants – like BASF in Ludwigshafen, which has three power plants; all three, however, run on natural gas. Bernstein Bank keeps an eye on the situation for you.

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

05.09.2022 –You know this from the supermarket and from advertising: goods that are supposed to appear visually cheap end up being priced at 99 cents. After all, 9.99 euros instead of 10 euros is a huge difference. Psychology. Of course, this looks like cheap junk that has to go. The same is true of the pan-European soft currency: the euro has just fallen to its lowest level in almost 20 years.

A truly sad anniversary. Will this trend – here the daily chart – turn around soon? The euro is showing signs of weakness, while the dollar is bursting with strength. On Monday morning, the Neo-Lira temporarily fell to 0.9879 U.S. dollars – the last time a euro cost less was at the end of 2002. The European Central Bank (ECB) had set the reference rate at 0.9993 dollars on Friday.

Source: Bernstein Bank GmbH

Commentators naturally blamed the gas crisis in Europe and Russia cutting off supplies for the development. There’s something to that: energy prices are skyrocketing, and oil and gas are paid for in dollars. America has both, Euroland rather little. In addition, the market sees the suicidal energy policy of old Europe – delivered to Russia, nuclear power is demonized. A blackout in winter is possible, which will hit industry and weaken exports – and thus the euro again.

Energy, Fed, domestic situation
In addition, the Federal Reserve is forging ahead with its tightening policy, while the European Central Bank is lagging behind – we have covered this topic several times here.
That leaves one issue that is rarely covered in the quality media: The risk of an uprising in Europe. Unlikely? That’s what our noble feathers thought before the fall of the Berlin Wall and the end of the GDR. In any case, high inflation is hitting the poorest households. And they could soon be in a bit of a rage, because the crisis is largely homemade by the ECB’s zero interest rate policy for years, as well as by an insane energy turnaround; moreover, the agony has been aggravated by the Corona measures and now by the Ukraine war.

Republicans as enemies of the state
To be sure, there is also ferment in the United States. Sleepy Joe Biden recently declared Republicans in Pennsylvania to be de facto enemies of the state – a group that mostly comes from the middle class, dutifully pays its taxes and has to watch left-wing radicals rage while woke dreamers ruin the big cities with open borders. By the way, Texas strikes back and carts many migrants to Chicago, New York or Washington D.C., directly into the leftist social paradise. In other words, to cities with enormously high murder rates, even though – or because? – they have tough gun laws. Biden spoke framed by two Marines in front of a wall illuminated in blood red. The intended association: hellfire, the Army is on my side. If only he wasn’t mistaken about that. We are curious to see if the situation escalates during the midterms.
But in a crisis, big investors will be careful to put their money where there is less risk of sovereign default and bonds will be repaid. And the U.S. still appears far stronger than Europe. We keep an eye on the situation and wish successful trades and investments!

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

02.09.2022 – So far, the skeptics have been right: the bull run of the past few weeks was probably just an interim rally in a larger bear market. And if these augurs continue to be right, there is more to come. So let’s let some bearish analysts have their say again.

The S&P 500 has now eaten back about half of its gains from the interim rally that began in June. The picture shows the daily chart.

Source: Bernstein Bank GmbH

And so it could continue: Wall Street’s biggest bear, Michael Wilson of Morgan Stanley, speaking to Bloomberg Markets on Wednesday, predicted “gloom and doom” – in other words, a veritable bloodbath on the stock markets.

Profit slump ahead

The current downturn, he said, is just the beginning of the next step down. Specifically, Wilson explained, “US stock indexes haven’t yet hit bottom for the year.” That’s because the trend in operating margins is worse than expected, he said. The stock market is far too optimistic about earnings expectations, he said. Between September and December, the market should pull in its bottom. Wilson also got specific: “We view 3,400 for the growth recession or soft landing.” This makes us wonder: what happens if there is a real, hard recession, i.e. no soft landing?

Goldman sees 3,150 in recession

Goldman Sachs recently provided a possible answer to this question. Chief Equity Strategist David Kostin predicted a target price of 3,150 for the S&P 500 in the event of a harsh recession. And just yesterday, Chris Montagu of Citibank spoke out: there is “little interest in dip buying at the moment. (…) Investors are struggling to contend with the prospect of further interest rate rises against an increasingly weak economic backdrop.”

The Fed is always too late

Incidentally, Morgan Stanley’s Wilson is not banking on the Federal Reserve intervening in time. He says important signals, such as from the labor market, are always just a look back: “By the time the labor market falls apart, it’s too late.” Which brings us elegantly to the events of the day. This Friday, all eyes will once again be on the figures for the U.S. labor market – by the time you read these lines, you will probably already know more.

The Labor Department will report a moderate gain of 300,000 jobs, according to most analysts, which would be a small drop from July’s gain of 528,000. What’s more, hourly wages are forecast to rise 5.3 percent year over year. Which could vindicate the Federal Reserve’s tightening policy. To be sure, bullish numbers could toss the stock market around again. But the buying restraint could also continue until mid-September, when the inflation data come in – the last important figures before the next Fed meeting. Whether long or short – Bernstein Bank wishes successful trades and investments!

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

30.08.2022 – Europe could lurch into crisis – and the EuroStoxx 50 right along with it. The old continent is facing some epoch-making tests. And presumably in the midst of the looming recession, the European Central Bank is launching a restrictive monetary policy. This is another lesson from the symposium in Jackson Hole last weekend.

The EuroStoxx 50 – shown here in the daily chart – had recently tended to benefit from the weak euro. This makes European goods cheaper abroad. But this could soon be over.

Source: Bernstein Bank GmbH

Because the European Central Bank is probably planning a hefty interest rate hike – which should cap inflation, but not the rise in energy prices. And it will also cut demand in the middle of a looming recession. For example, in the construction sector or in retail.

Jumbo Move

For example, Bloomberg reported after the Jackson Hole symposium that a large minority of decision-makers within the ECB are ready for a big 75 basis point rate move. Thus, a “jumbo move” is quite conceivable to curb high inflation. In other words, as the Federal Reserve demonstrates determination to tighten, Europe can no longer hesitate. This is because the weak euro is importing inflation into Euroland via all imports from grain to energy. Inflation in the euro area had risen to a new record of 8.9 percent in July- more than four times the target of 2.0 percent.

Big interest rate move ahead

Reuters added that on Saturday, leading European central bankers had spoken accordingly at the Monetary Policy Symposium in Jackson Hole. Both ECB Director Isabel Schnabel and the central bank chiefs of France and Latvia, Francois Villeroy de Galhau and Martins Kazaks, had advocated significant rate hikes to combat runaway inflation. Kazaks, for example, put 50 to 75 basis points into play. He added that the money market had already priced in 67 percent of a 75 basis point rate hike in Euroland. Before Jackson Hole, the probability of such a move was only 24 percent.

Threats everywhere

It is not only monetary policy that threatens the turnover of European companies. The middle class has been expropriated for years by the European Central Bank’s zero interest rate, which is just now culminating in inflation. Purchasing power is also threatened by politics: On the one hand, there is the screwed-up energy transition, which pushed prices up even before the Ukraine war. Further, supply shocks from the policy response to Corona. The citizens, who are already being hammered by high taxes and social security contributions, receive little or nothing in return from politics: imported crime, intolerable conditions in many schools.

One believe, it ferments in Euroland. In France, high-ranking former generals warned against intervention some time ago. In Germany, the deployment of the Bundeswehr at home is being discussed. In short, we are curious to see whether Europe is in for a hot autumn. For example, a blackout on cold days. With consequences for the stock market. Bernstein Bank keeps an eye on the market for you.

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

 

29.08.2022 –The Jackson Hole symposium is over, but the meeting is having an impact: Jerome Powell was unusually outspoken. The head of the Federal Reserve announced “pain” for private households and companies. Inflation must be fought at all costs, he said, or the consequences will be even worse. And yes: interest rates will go up and stay there for a while. Frustration erupted among the bulls.

The Fed spoke, the market reacted: High-tech, interest-rate-sensitive stocks, in particular, went down hard. You can see this very nicely in the four-hour chart of the Nasdaq 100. News from Apple was also not very helpful for the index: According to “Politico”, the probability of an antitrust suit increases. But all indices reacted snuffy to the note bank symposium.

Source: Bernstein Bank GmbH

Powell’s most important statement Friday was this one: “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

Unexpectedly resolute

In terms of content, the master of money had announced little that was new. The question of whether an interest rate step of 50 or 75 basis points is due in September, Powell made dependent on the data coming in until then – making the labor market report on September 2 and consumer prices on September 13 particularly interesting for traders. However, it was enough that he did not reach out to the doves who had hoped for an easing of the tightening. And unusual was also the way HOW Powell appeared: the speech was not even ten minutes long – scheduled 30. So concisely he had rarely reiterated the determination to a hawkish course. The signal to the financial world: no big words – no talk, but action.

Unusual plain speaking
This caught everyone on the wrong foot who had expected a waxy one-sidedness underpinned by word clouds with signals of easing. The take-home message: interest rates will rise and they will stay up – “for some time.” Economist Michael Pearce of Capital Economics commented, “Powell’s speech was concise by Jackson Hole standards and hawkish throughout…. That appears to be part of a coordinated push from recent Fed speakers against the idea that the Fed is close to pivoting and will quickly turn attention to cutting rates again.” And Zhiwei Ren of Penn Mutual explained, “Powell mentioned his willingness to tolerate a softer labor market and economy to achieve the inflation mandate. He cautioned the risk of ‘prematurely’ loosening. He also said restoring price stability will likely require maintaining a restrictive policy stance for some time. This is him pushing back the market pricing in rate cuts in 2023.”

More government money
However, a small glimmer of hope remains for all the bulls hoping for more money for the market: De facto, two opposing forces are facing each other right now. On the one hand, the Fed. On the other hand, the Democrats are handing out election gifts before the midterms. For example, many tuition fees are to be taken over, which will cost between $300 billion and $600 billion. More is likely to follow in other projects. We keep an eye on the situation for you – and wish you successful trades and investments!

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7

25.08.2022 – Tomorrow, Friday, is the day: Wall Street and the rest of the stock market world will be glued to their screens, watching Jerome Powell’s words. The head of the Federal Reserve will deliver a speech at the global central bank meeting in Jackson Hole, Wyoming. Aggressive tightening or a pause due to recession risk? Easing or a surprise move with even higher interest rates? We are eager to see the tightrope act.

At 10 a.m. local time it will be exciting, then Powell will step to the microphone at the Grand Teton. And then we will hopefully get an answer to the question of what the major central banks mean when they give their annual symposium the title “Reassessing the constraints on the economy and policy”.

Tightening or easing?
At the moment, a majority in the US is assuming an interest rate hike of 75 basis points on 21 September. This is because inflation in the US is raging at 8.5 per cent. However, rising prices could turn into a buying strike and trigger a recession, signs of which can already be seen in the housing market and the service sector. Which argues for low interest rates. So will the Fed stick to its tightening, which could stifle the economy? Or will the central bank ease a little and risk a renewed rise in inflation? The interest rate-sensitive high-tech stocks in particular currently illustrate the directionless hope and trepidation – the Nasdaq 100 hangs between the 200-day moving average (above) and the 50-day moving average on the daily chart.

Source: Bernstein Bank GmbH

We found the most convincing forecast for what is likely to come at Goldman Sachs. Economists Jan Hatzus and David Mericle believe Powell will make the case for tightening, as he did in the July press conference and as can be read in the July Fed minutes. At the same time, however, he would reaffirm the Fed’s willingness to lower inflation. Furthermore, Powell will probably point out that the September meeting will depend on the latest data coming in. We think: This does look very much like Powell initiating the withdrawal of future large rate hikes.

Goldman sees dovish signals
The bottom line: Goldman expects a rate hike of only 50 basis points in September and only 25 points in November and December. Which the market should celebrate. However, there are upside risks to the rate forecast of 3.25 to 3.5 per cent: for example, the robust labour market and the stickiness of rising wages and inflation. Nevertheless, if the FOMC decides to tighten more aggressively, it is more likely to be several 50-point steps than 75 points in September.

We summarise: If the Fed goes ahead as expected by the gold men because of the risk of recession, the result should be rather bullish for Wall Street – because then it means more money for the market again. So let’s wait and see – Bernstein Bank wishes you successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7