A FED & RBNZ Recap…The global picture doesn’t look good for the kiwi at the moment. , A Close Look At The Fed and The RBNZ… The FOMC are expected to hold tight at 0.5% this evening.Three Investment Scenarios. Rated!… More and more investors are now moving their portfolio’s into defensive stocks; and not just punters. Has Oil Hit A Floor…?The low in WTI last week was $27.85 a barrel.
A FED & RBNZ Recap
28.01.2016 Neither the Federal Reserve or the Reserve Bank of New Zealand moved on rates at yesterday’s meetings. The Fed held tight at 0.5%, as expected and didn’t mention anything abnormal or unexpected, leaving the dollar a bit jittery, but pretty much stable against the rest of the majors. There is still a chance the Fed could hike in March, however we should keep in mind that the futures markets have only priced in 1 more hike in 2016. If that ends up to be the case, then it probably won’t be in March. In addition to that, after the recent global market turmoil, it does seem unlikely that the Fed will hike again so soon.
They’ll most likely save it for their June meeting. Who knows though, now they’ve started maybe they’ll keep going… The RBNZ were slightly more dovish in their comments. Although they didn’t cut rates at this meeting, Governor Wheeler did open the door to further rate cuts, stating that if inflation doesn’t pick up, then the RBNZ will ultimately have to act. The global picture doesn’t look good for the kiwi at the moment. With milk prices continuing their slow and endless decline and disinflation now taking affect in NZ, we could see another 5-10 cent decline of the NZ dollar against the greenback over the course of 2016.
A Close Look At The Fed and The RBNZ
27.01.2016 The FOMC are expected to hold tight at 0.5% this evening. The Statement however, should be highly anticipated, as market participants will listen closely to hear any further signals towards another potential rate hike in March. The RBNZ on the other hand are expected by many to cut interest rates from 2.5% to 2.25%. To be honest I don’t think they will at this meeting, as they’ll most likely like to see what the Fed does over the next few meetings before they take any action. The RBNZ are known for taking action when they’re not expected to however, and so we could see some major volatility from the kiwi across the board, especially against the dollar if we get some hawkish comments from Yellen. There could be some massive movements in NZDUSD this evening so if you’re into trading with major volatility, keep an eye on the pair from 1845 to 2030 (GMT) this evening, trade small and watch the levels I’ve put on the chart below.
Three Investment Scenarios. Rated!
26.01.2016 The markets are incredibly weak at the moment. Yesterday I was watching Bloomberg for a bit, and although I’m not in agreement with most of what they say (be wary of business television traders!), they did touch on something that I thought was incredibly simple yet incredibly insightful. More and more investors are now moving their portfolio’s into defensive stocks; and not just punters, this is an institutional movement. This is a big insight into the current sentiment towards risk. People are moving into stable bonds and defensive stocks. Utilities and strong companies with decent dividends should be the out performers over the course of 2016. Of course you’ll get the few growth stocks that always shoot up, however this won’t be a major theme of 2016; expect more and more of what we’ve seen over the last 3 months.
The way I see it there are 3 scenarios, and only two are likely. I know it’s dangerous but I’m going to go out on a limb and put percentages against each: Scenario 1: The markets get an injection of QE from several sources and push back up to their highs, giving good returns for 2016 Scenario 2: Markets stick around these levels for the bulk of 2016 and form a 5-7% range where they rotate back and forth. Scenario 3: We see a further fall and a “proper” retracement from the highs seen in 2015. This scenario could last a few years and will ultimately result in a bear market with the market pulling back between 20 and 50%. I don’t see scenario 1 being a massive reality with the current way market participants are behaving, so will give it a 20% chance of occurrence. Scenario 2 is more likely, so will apply a 35% chance of occurrence and of course scenario 3 gets the rest; a 45% likelihood of occurring. Now obviously these are all rankings based on an educated “gut feeling” and are by no means advice; take it with a grain of salt. In saying that you should be careful when choosing your investments/trades this year and keep an eye on high grade bonds as they can sometimes be a leading indicator for institutional investors.
Has Oil Hit A Floor…?
25.01.2016 Crude has been in free-fall mode since October last year. The low in WTI last week was $27.85 a barrel, which we hit on Wednesday. Following that low we’ve actually seen a bit of a retracement; many market participants are now calling a bottom in this heavily oversold market. We all know that markets aren’t entirely efficient. Markets almost always overreact to the economic climate/current conditions due to the nature of people to react irrationally when they are going through the process of experiencing extreme fear or greed. This is why it is so hard to pick bottoms in markets.
With all the fundamentals behind oil maintaining their bearish slant, it is hard for us to build a rational argument to buy oil at all. With Iran now supplying oil to the global markets, the Saudi’s not looking like they’ll cut supply anytime soon and OPEC under the headship of the Saudi’s, it doesn’t seem that oil could go up anytime soon. This is why it’s tricky! What we have to do as traders is take all this into account and make a decision whether the markets have priced in all the bearish sentiment and are now oversold, waiting for Iranian supply to legitimise the current price. The value in my opinion is going against the crowd when markets are facing a situation like Crude. At the end of the day, any “HOT” conflict in the middle east, which looks likely, will cause a massive buy up of Crude, so maybe it’s not so much of a bad move to begin building a long position…
