Don't Be Fooled!

We are suspicious.  As we read through the investment banks and analysts thoughts and idea for 2019, we get the sense that many of them feel that the world is looking better for equity markets:

  1. Valuations are obviously better after the drop we saw last year in Emerging Markets and in Europe, while the drop in the U.S. in Q4 helped work off some overbought/overvaluations for many companies.
  2. The Fed has signaled that they are less hawkish regarding hikes going forward, but we think there is a good chance of at least one more to come.
  3. President Trump seems to be looking to find common ground with the Chinese government regarding trade before the end of March deadline.
  4. Brexit, not sure what to make, but it seems to us if they could just decide something/anything, then the market could react, and then move on.
  5. China is cutting interest rates and focused on creating growth.
  6. Oil prices after hitting highs in Q3 last year have dropped and now currently are trading at $52 in WTI and $61 in Brent.  Which seems to be a price that everyone can live with for now.
  7. The above factors combined with others, seems to have the experts looking for equity returns of 8% to 10%, with many touting EM equities as the place to be to take advantage of the upcoming rally.

We are confused because we don’t see that the main issues that worried us in Q2 and Q3 have been cleared up.

  1. Debt levels around the world for both corporates and governments, continue to grow and the U.S. budget deficit is set to pass the $1 Trillion level in 2019.  The rising U.S. rates last year is feeding through to those who borrow in USD globally.
  2. Trade tensions, although looking better as both China and the U.S are worried, are already hurting companies, and some countries.  Germany may well print a 4th quarter negative growth, which follows on the Q3 -.2% growth.
  3. Political uncertainty around the globe will most likely continue to cause business leaders and consumers to ponder what’s next.  France, the U.S., Italy, Middle East, Russia all come to mind…
  4. The lack of Central bank bond buying, combined with the Federal Reserve shrinking its balance sheet are not positive for equities.

On the charts we follow, the move we have seen since the lows has been impressive, but is still in what looks like a correction to us.

Lets not forget where we came from!  And maybe it doesn’t matter much what we trade at the moment?  (charts look similar, risk on is risk on for now.)

S&P 500 CFD

Crude Oil

Ford Motor company CFD

Uranium Energy Corp CFD

Contact us if you are interested in receiving real time trading signals. In doubt? Check out our track record below!

TickerDate OpenedEntry PriceStopTarget PriceCurrent Price
Long XAUUSD31/121282.50127013201287.40

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– Mark W

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