The prolonged period of consolidation, which has characterized the principal bourses since the end of 2015, does not seem able to change over the short term and give way to a more definitive bottoming. Indeed, the elements of uncertainty are such and so many that it is difficult even to define, from a technical perspective, the current market action as a distribution rather than an accumulation phase.
To better understand you can refer to the EuroStoxx 50 index, which since last fall, despite having recorded remarkable oscillations, even in the area of 20%, tends constantly to return to the technical level of 3000 points, remaining in a trading range between 2900 and 3100 points. But the major US indices and the Japanese Nikkei index will not find themselves in a very different technical situation, although the first to enjoy the benefits of consolidating near their respective highs. This phase of substantial standstill is understandable when you consider that the securities markets are look-forward discount mechanisms, and constantly try to evaluate the prospective macroeconomic scenarios.
Currently this task is particularly thankless because the underlying element of reference, constituted by the credibility of central banks, to which investors have granted immense trust in the years following the crisis, has demonstrated all its inconsistency since last winter. In fact, the lack of satisfactory results in economic terms of the various credit stimulus programs executed over the years and the constant vacillation, rather than changes of direction, by the major central banks such as the Fed, the BOJ and the PBOC, have created a state of uncertainty which has resulted in the bourses standstill. The month of November has commenced with maximum uncertainty as to the outcome of the upcoming US presidential election, with current polls indicating a moderately favored Democratic candidate with the risk that her eventual margin proves so tight as to lead the Republican candidate to appeal the outcome of the election which would lead to a negative impact on the dynamics of international capital markets. Therefore, prudence in investing in the stock markets suggested during the month of October remains in force in the short term as a buying opportunity could present itself near support levels that the indices reached in recent months, such as 2900 for the EuroStoxx 50 and 2000 for the S & P 500. However, if we disregard the factor of US presidential elections, there are two recent developments of a fundamental nature that we must carefully consider the implications they may have on market trends. The first regards the liquidity of the US private sector, thus, that of the companies, which year to date contracted sharply; compatible with an economic slowdown next spring. Indeed, GDP growth in the first half was asphyxiated and the recent data on unemployment confirms that the world’s leading economy struggles to grow at a rate greater than 1.5% in real terms. The second regards the continuous change in monetary policy implemented by the PBOC, China’s central bank, starting from beginning of the year, passing from the credit tightening of the 2013 – 2015 to an aggressive monetary stimulus: that is reflationary, which caused the wholesale price index to increase marginally in September, which had not happened since 2012. In summary, the possible divergent dynamics of the world’s two largest economies could stabilize global growth of 2017 at this year’s levels, confirming the reasonable doubt that the considerations of the return of an upsurge in inflation in developed countries is rather an illusion induced by the effect of price increases of basic raw materials in the last 12 months which have rebounded from the lows. So the correction in fixed income security prices seen this summer could persist in the near term, indicating a shortening of maturities, but would be temporary considering difficulties of the governments interested in implementing structural and fiscal measures that can affect systemic deflation. The recent dynamics of the dollar, which has weakened despite the expectation of a future increase in interest rates, and the presence of the Russian Navy in the Eastern Mediterranean, and that of gold which has risen moderately, due to its characteristic of being real money, as opposed to paper money which is subject to devaluations due to deflation, seem to confirm this thesis.
Nicola Bravetti Fonte dati: Bloomberg