Is the financial “bubble” preparing to burst?

By 17/09/2020News
Morning Stock News

Gold  1941,60

EURUSD   1,1758

DJIA  27651

OIL.WTI  39,545

DAX   13199,33

Wednesday proved to be an optimistic day for decision taking. In anticipation of a press conference from the US Federal Reserve, most investors tried to buy while waiting for statements from the US Federal Reserve.



Let us try to look at the current market situation from the theory side. The coronavirus pandemic, which was to bring chaos to all financial markets, did not work. The US stock market continues to trade near its record highs. Why?
There used to be one definition called the “Minsk moment”. Analyst Haiman Minski said that when the market grows irrationally for a long time, a deep collapse will inevitably follow. Such movements took place in 1998 and 2008, when market collapses triggered various economic factors.
The US Federal Reserve injects huge amounts into the economy. Given zero interest rates as well as bond yields, money goes directly into company stocks. It is not yet known what such an entrance into companies’ positions can do for investors. If there is a sale cascade that triggers a certain wave of market positions, we may see the greatest sale on the stock markets in 20 years.


There is a very ambiguous situation on the market. On the one hand, the coronavirus pandemic, which is gaining momentum every day, is putting pressure on the global economy and forcing investors to try to forecast the situation for months to come, although a vaccine is about to appear which will save everyone. On the other hand, oil reserves have fallen by 150-200 million barrels since the summer peak of 1.2 billion barrels in the autumn.
Statistics say the opposite and make the price of WTI oil rise. On Wednesday, the oil price rose by more than 4% in just one trading session and traded at $40 per barrel. This was once again supported by a cheap dollar and optimistic sentiment among investors.
All of this looks great in the current situation, but everyone remembers the April collapse when the price of futures went down. The main thing in this situation is to know that the oversupply reaches a point where the cost of chartering a floating storage tanker is a bit profitable. At the time, the price of oil was around $10 per barrel.
The second wave of coronavirus will be a major obstacle to both the growth of the oil market and the world economy. Perhaps the “bubble” that has already been inflated will burst soon. All we have to do is wait for the catalyst.

What awaits us today?

03.30 Change in employment rate in Australia for August
09.00 Press conference of the Bank of Japan
11.00 EU Consumer Price Index from the beginning of the year
14.30 Number of initial applications for unemployment benefits in the USA

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 come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.