Enough Already! Markets See A Years Turmoil In A Month!

This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way. It was another roller-coaster week on the markets, as US equities fell, the dollar rallied, and precious metals slumped in New York. As well as building tensions around potential military action in Iran, President Donald Trump’s pick of former Federal Reserve governor Kevin Warsh as the next chairman of the central bank shook things up as profits were taken, and the speculation wave turned. Results from AI heavy stocks while positive still had mixed impact of the share prices of the Mag-Seven. The FED Held rates, as expected, and spoke about a better balance between employment and inflation risks, suggesting Powell may have shepherded his last cut before leaving the Chair in May. The MSCI Global index fell 0.56% on Friday, though was still up 0.65% for the week, with the European STOXX 600 rose 0.64% on Friday. The S&P/ASX 200 dropped 0.7 per cent, though despite the pullback, the benchmark finished up 0.1 per cent for the week but ASX futures are pointing to a 1.45% drop on Monday morning. The MSCI Index for Asia Ex Japan fell 1.93%. We saw a reversal in US dollar weakness with the DXY up 0.74%, though still lower by 1.35% over the past month, The Australian dollar fell 1.23 per cent on Friday from recent highs. The US dollar, which had fallen sharply in recent weeks amid talk of the so-called debasement trade – whereby the White House was not-so-secretly happy to see the Greenback fall as it made US exports more competitive and reduced the ‘real’ value of America’s massive debt pile – jumped sharply on Friday, as investors reasoned Warsh wasn’t going to deliver the big rate cuts other Fed chair candidates may have argued for. Precious metals reversed off recent nose-bleed highs with gold futures down 11.39% and Silver down 31.37% on profit taking, and perhaps a change in sentiment. A pullback was overdue, and all that was required was a Warsh shaped spark. These were the biggest falls since 1980. Bitcoin was down more than 6% for the week. On Warsh, who has a hawkish reputation and is seen as independent by markets may be better placed to bring the [Federal Open Market Committee] along with him to deliver at least two and plausibly three cuts this year than some rivals. But Warsh is a markets guy, who has spent the last few years working for billionaire investor Stanely Druckenmiller, perhaps the most universally respected voice on Wall Street. Warsh will probably end up being pretty pragmatic about inflation and rates. The fascinating question is whether Trump, who also appointed Powell, comes to regret his choice. But we may also see reform at the Fed assuming he is confirmed in the role, with less market intervention from the Central Bank. Warsh wants to shrink the Fed’s balance sheet, which remains bloated following the bouts of quantitative easing since the GFC, whereby the Fed bought up bonds and other debt securities to help bring rates down and make credit more freely available. There’s a problem with shrinking the Fed’s balance sheet, however. According to modelling by Oxford Economics, for every 1 per cent decline in the Fed’s holdings of Treasury securities as a share of US GDP, the 10-year yield rises 17 basis points, controlling for several other factors including debt and demographics. Markets will watch for events surrounding Iran, the US Government shutdown avoidance and the AI Hype. Plenty to keep markets volatile and a swing back towards metals is still on the cards. And its only January! http://www.martinnorth.com/ Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ Go to the Walk The World Universe at https://walktheworld.com.au/ Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts Please consider supporting our work via Patreon: https://www.patreon.com/DigitalFinanceAnalytics The full detailed set of post code data is available as a subscription service. Or make a one-off contribution to help cover our costs via PayPal at: https://www.paypal.me/MartinDFA We also can receive bitcoins at: 13zBL1oRib9VJu8Uc9zUGNhxKDBBgUpDN1 Please share this post to help to spread the word about the state of things.... Caveat Emptor! Note: this is NOT financial or property advice!! 🚨BEWARE OF SCAMMERS🚨 As there are accounts impersonating Walk The World in the comments on YouTube, note that our comments will have a distinguishable verified symbol. And remember that we will never message you asking you to give us money or talk to us on other platforms such as WhatsApp or Telegram