Financial Markets
The
US equity market sold off again. This week the S&P500 and
the NASDAQ
100 lost 1% and 3.3%, respectively. The small
cap
index (Russel 2000) was down 4%. Trading volumes were
considerably above average, indicating that sentiment might be changing
to bearish.
The
metals were stronger this week. Gold
and silver gained 1.8% and 4.5%, respectively. In times of fear, cash is
king, and precious metals are not immune to a selloff in the next months, especially if liquidity is hindered.
Gold didn’t reach the 3k$ level yet, and may not get there before a
pullback and/or consolidation around current levels.
WTI went down to 67$/bbl. If it continues falling, the next support levels are at 64 and 62$.
Bitcoin fell a whopping 12%, and has the next support level around 74k$.
The
relative
strength of the US dollar (DXY) fell massively, to 104. The
EUR/USD is around 1.083$, the GBP/USD is at 1.291$, and the USD/JPY is at
148.03 JPY.
US M2 money supply at the date of 27th January 2024 was flat, which could be a bearish sign, together with the recent selloffs.
The
national financial
conditions index (NFCI) for the week of 24th February 2025 tightened by 2.9%, another bearish sign! Note that this indicator is
delayed by a week.
US
bond yields increased slightly this week, and now sit at 4.000% for
the
2-year
and 4.305% for the 10-year. These are below the current FED funds rate,
showing that investor expectations favor a decrease in interest rates,
and lower inflation.
The VIX closed the week at ~23. If the selloffs continue, it can head to to the 28 area. Now, premiums and fear in the market are reaching a healthier level and
are not subdued.
Comment Section
We are at a critical point in the markets. The uncertainty due to the US tariffs, geopolitical stress, and earnings stagnation are coming together to induce a correction in equities. Let’s be careful and not rush in.
Historically, the beginning of the last recessions has coincided with the time the FED starts cutting rates. We are there. If we are going to have a recession, it should be in 2025. If we wait a few months on the sidelines, good opportunities will come.
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Channel: Rebel Capitalist
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