Gold 1788,295
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EURUSD 1,1815
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DJIA 34874,50
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OIL.WTI 69,315
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DAX 15615,50
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Strong economy, strong currency – one of the tenets of fundamental analysis is familiar to any investor. Should investors start thinking about selling off the US dollar as early as Q3 2021 with all economic indicators pointing to a slowdown?
DXY
Things are actually getting a lot more interesting. It won’t be long before we can try to rewrite such fundamental statements as markets change and the world economy changes. This fundamental works when the money supply remains relatively stable and there are no major fluctuations in the balance sheets of major central banks. But in our situation, money is flying into the economy from all directions.
Over the last year we have seen how the stock market can grow with a constant boost from the government. Cash-strapped companies are pouring money into circulation and people are spending free dollars from the government. Most of the big companies show record revenues and profits, and then prices go up as well, fuelling everything around them.
The S&P500 index is now 25% dominated by big tech companies which continue to drive it up. The rest of the companies, especially the smaller ones, are selling off and are in negative territory. Everything is heading towards this trend ending sooner or later.
The current stock market price takes into account all the latest news and predictions from the past couple of months. There will be several events next fall that could quietly move the S&P500 to the 4300-4200 level and the US dollar to 95.
Ahead of the Fed meeting. The labour market is rising and will be strong going forward. A slightly sluggish economy is no reason to keep pumping money into the markets, so we can assume that the Fed will start a bailout programme in 2021 after all.
Another factor that is bound to affect the USD exchange rate is the ECB interest rate decision and the press conference that will shed light on the European Central Bank’s further actions on its stimulus programme. Christine Lagarde is likely to continue to print the Euro, even though many countries have already reported positively on their progress in economic recovery.
Autumn will be a very tricky period for all investors because without strong catalysts there will be a bunch of different factors to consider when making decisions. The dollar could well become a safe haven currency for a while, along with the Swiss franc and gold.
3.30 China Consumer Price Index YTD
13.45 ECB interest rate decision
14.30 ECB press conference on monetary policy
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