Friday, Wall Street trading, saw strong gains to generate a good bounce after the previous sharp fall.

A significant driver were the comments of a Federal Reserve official to the effect that a lower 25 point rate hike, may now be appropriate. Certainly, the fundamental economic data is all pointing to a sharp weakening. One which could get away from the Fed. However, there is rarely full agreement, and the sway of the Chairman at any meeting of the FOMC, is always significant.

Running a little against market sentiment at the moment, I continue to forecast another two 50 point rate hikes. The market seems to now be setting itself up to be surprised by such a hike. Which means prices may be vulnerable around the next FOMC.

The big economic news on the day was the US Existing Home Sales data.

This saw a sharp drop to extremely concerning levels. Since 2021, I have been warning the US is already in its second great 'property bubble' that no one wants to talk about? Markets have chosen to look away from what was happening in housing, largely because it just feels too uncomfortable for all those big investment banks. Hence, commentaries have tended to be steered away from this area of the economy.

US Existing Home Sales are now lower than during the Covid lock-down period.

In fact, Existing Home Sales are now at full blown Global Financial Crisis levels, and back down to levels otherwise not seen since the 1980s.

This is as bad as it gets. It comes on top of a services sector that is already in contraction and a manufacturing sector that is clearly continuing to wind down. The US economy is literally in dire straits, and to quote “The Big Short” movie, "everyone is walking around like they are in an Enya video”.

The stock market is mistakenly fixated on the outlook for US rates as the be all and end all in deterring the trajectory of the market.

The core forces of the real economy and their impact on future earnings are being perilously neglected. When big tech lays off record numbers of workers, their stocks rally on the basis of the reduction in overheads. Ignoring the reasoning in back of those layoffs? The future is not so bright.

The end twist  to all this is the harsh risk of a further 50 point rate hike at the next FOMC. Even at 25 points, it still means, rates, consumer, business and mortgage strain will continue to climb.

With the economy already in dire straits, with rates still going up, and the significant lag time of the full impact of the rate hikes still to be seen, we are moving from a question of a recession or not, to far more frighteningly, a question of whether the US will experience Recession, or indeed Depression?

At the very least, a severe Recession appears likely.

This is what we have been forecasting for over 12 months now. That US economic growth would be flat and dipping in and out of recession for several years.

This week sees Q4 GDP for the USA, that is likely to register a slowing from the 3.2% growth of Q3 to about 2.7%.

The global investment world is catching up with the reality of on the ground USA, and is why we are seeing simultaneous declines in stocks, property and the dollar.

RISK WARNING: Foreign exchange and derivatives trading carry a high level of risk. Before you decide to trade foreign exchange, we encourage you to consider your investment objectives, your risk tolerance and trading experience. It is possible to lose more than your initial investment, so do not invest money you cannot afford to lose。 ACY Securities Pty Ltd (ABN: 80 150 565 781 AFSL: 403863) provides general advice that does not consider your objectives, financial situation or needs. The content of this website must not be construed as personal advice; please seek advice from an independent financial or tax advisor if you have any questions. The FSG and PDS are available upon request or registration. If there is any advice on this site, it is general advice only. ACY Securities Pty Ltd (“ACY AU”) is authorised and regulated by the Australian Securities and Investments Commission (ASIC AFSL:403863). Registered address: Level 18, 799 Pacific Hwy, Chatswood NSW 2067. AFSL is authorised us to provide our services to Australian Residents or Businesses.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD extends recovery above 0.7100 despite caution stems in market mood

AUD/USD extends recovery above 0.7100 despite caution stems in market mood

The AUD/USD pair has accelerated to near 0.7115 after rebounding from below 0.7095 in the Asian session. The Aussie asset is scaling firmly higher despite the expression of caution in the market sentiment.

AUD/USD News

EUR/USD reflects market tension around 1.0870 ahead of German GDP, Fed vs. ECB battle

EUR/USD reflects market tension around 1.0870 ahead of German GDP, Fed vs. ECB battle

EUR/USD treads water around 1.0870-60 as markets remain on a dicey floor ahead of the key central bank meetings and data. Adding strength to the market’s indecision could be the return of China and fears of a softer growth number from Germany.

EUR/USD News

Gold senses hurdles around $1,930 as market mood sours, yields extend gains

Gold senses hurdles around $1,930 as market mood sours, yields extend gains

Gold price (XAU/USD) has sensed barricades while attempting to cross the critical resistance of $1,930.00 in the Asian session. The precious metal has witnessed selling interest as investors are turning risk averse in the interest rate policy week.

Gold News

Why Ethereum bears need to be cautious about shorting ETH before $2,000

Why Ethereum bears need to be cautious about shorting ETH before $2,000

Ethereum price has been consolidating after the January rally subsided after three weeks. This tightening continues even after BTC shot up 3% over the weekend. Therefore, a short-term spike in buying pressure should is likely. This move could propel ETH to tag immediate hurdles, liquidating early bears.

Read more

Big risk this week Fed hikes 50 points

Big risk this week Fed hikes 50 points

While the entire global investment community is apparently very excited about the US Federal Reserve slowing its rate increases to 25 point increments, there are strong reasons for arguing why another 50 point rate hike, or two, are still on the Fed menu.

Read more

Majors

Cryptocurrencies

Signatures