Comment of the Day
Video commentary for March 16th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Fed raises rates, gold and bonds steady, stocks rebound, China announces support measures to arrest the downward acceleration in the stock market and high yield bonds, Dollar eases, Euro and Renminbi steady, Hang Seng surges, Europe and Japan firm from 1000-day MA.
Please note: I will be travelling tomorrow and in meetings all day, so the video will probably be recorded later than usual.
This article from Bloomberg may be of interest to subscribers. Here is a section:
In a brief statement carried by state media, China’s top financial policy body vowed to ensure stability in capital markets, support overseas stock listings, resolve risks around property developers and complete the crackdown on Big Tech “as soon as possible.” Yi Gang, governor of the People’s Bank of China, followed with a statement saying the central bank would help implement the policies, as did the banking watchdog.
While the pledges from President Xi Jinping’s government offered little clarity over what authorities may do to achieve their goals, it was the first time China publicly addressed investors’ top concerns in one coordinated swoop. The move underscored Xi’s focus on ensuring economic and financial stability before a Communist Party congress at which he’s expected to secure at least another five years in power.
By the time trading ended just after 4 p.m. local time on Wednesday, the Hang Seng China Enterprises Index was up 12.5% in its best session since October 2008. Alibaba Group (NYSE:BABA) Holding Ltd. surged 27%, while JD.com Inc (NASDAQ:JD). jumped 36%. Property stocks rallied the most in more than a decade.
My view - Investors have been fearful of buying Chinese securities because of uncertainty about the commitment of the government to do what is necessary to protect the economy. Now they have an answer, government officials do not like volatility and China’s stock markets have been falling in a very panicky manner.
Ray Dalio's "Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail"
This video discussion between Ray Dalio and Henry Kissinger may be of interest to subscribers.
Fed Lifts Rates a Quarter Point and Signals More Hikes to Come
This article from Bloomberg may be of interest to subscribers. Here is a section:
“The American economy is very strong and well positioned to handle tighter monetary policy,” Powell told a press conference Wednesday following a meeting of the Federal Open Market Committee. “We are attentive to the risks of further upward pressure on inflation and inflation expectations.” He also said that officials could move faster on policy tightening if needed.
The hike is likely the first of several to come this year, as the Fed said it “anticipates that ongoing increases in the target range will be appropriate,” and Powell repeated his pledge to be “nimble.”
“I saw a committee that is acutely aware of the need to return the economy to price stability,” he told reporters, characterizing the mood around the table as policy makers debated the outlook. “It is determined to use its tools to do so.”
In the Fed’s so-called dot plot, officials’ median projection was for the benchmark rate to end 2022 at about 1.9% -- in line with traders’ bets but higher than previously anticipated -- and then rise to about 2.8% in 2023. They estimated a 2.8% rate in 2024, the final year of the forecasts, which are subject to even more uncertainty than usual given Russia’s invasion of Ukraine and new Covid-19 lockdowns in China are buffeting the global economy.
My view- The market took the first hike in this cycle in its stride and not least because it has been fully priced in over the last four months. Remaining nimble is going to be essential. Uncertainties abound, not the least of which is China’s problem with containing the omicron variant is only just beginning. Predicting 1.9% by the end of the year implies at least a 25-basis point hike at every meeting. That seems ambitious in the extreme.
Wait Times for Chip Deliveries Grow Again as Shortages Persist
This article from Bloomberg may be of interest to subscribers. Here is a section:
Lead times -- the lag between when a chip is ordered and delivered -- increased by three days to 26.2 weeks last month, according to research by Susquehanna Financial Group. In January, the group reported that delays were getting shorter, the first sign of improvement since 2019.
Though the lag times have now increased again, they aren’t growing quite as quickly as during much of 2021. But certain sectors were hit worse than others. Delivery times for microcontrollers reached a high of 35.7 weeks in February, according to Susquehanna’s research. Lead times also increased by a week and a half for power-management components. Both are essential parts of many electronics, including car components.
The global shortage of semiconductors began in the first half of 2020, driven by pandemic-fueled demand for consumer technology and vehicles. The scarcity of chips has held back production of everything from smartphones to pickup trucks, leading to billions in lost revenue and contributing to inflation by raising costs.
My view - Ukraine is a major supplier of neon gas. It’s an essential component for the production of semiconductors. The war in Ukraine is therefore contributing to the shortfall in supply. At the same time, the increased demand for all sources, including military are inhibiting the balancing out of the market.
The Chart Seminar June 6th & 7th in London
Now in its 53rd year, the first venue for The Chart Seminar in the post pandemic era will be in London on June 6th and 7th at the Army & Navy Club.
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Eoin's personal portfolio: equity index long closed at a small loss March 1st
One of the questions subscribers as most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.