The June market digest was almost ready send out and initially it focused on analyzing the impact of US-China Trade War on global economies and stock markets, but things changed so rapidly within the world of trade and politics that it made the material for the market digest outdated even before it could be sent to the printers. So, I went back to the drawing board and started from scratch. Within the last three to four weeks consider this whirlwind pace of events:
Phew!!! Will someone pass the popcorn please. Whatever happened to the lazy, hazy dog days of summer when nothing happened!
Any missive on the importance of the absolute independence of the Federal Reserve Bank and the consequences of even a perception that the Fed was doing the bidding of the Politics du Jour will have to wait for another day. Let’s take a step back from all this fast-paced noise and focus instead on the essential picture – Central Bank Interventions. It is not that the central banks of all these economies are engaging in a coordinated global intervention. Each bank is focused on its own economy, but in the process, they are creating global central bank intervention (albeit uncoordinated). And this will have significant consequences for global stock and bond markets in the short-term and the long-term.
- President Trump tweeted threats to impose tariffs on Mexico to deal with a non-trade issue, which is Immigration.
- Federal Reserve Bank changed their position a 180 degrees from continuing to increase interest rate hikes (December 2018) to willingness to consider cutting interest rates in the coming months (June 2019).
- The stock market is anticipating two or three interest rate cuts this year with the first one as early as July 2019.
- Bank of Japan announced a readiness to cut rates and expand their buying of Japanese blue-chip stocks in Japan’s stock market.
- European Central Bank (ECB) announced that it is going to delay raising its interest rates (they are currently at negative interest rates and will stay that way for longer). Chairman Draghi of the ECB said that they would also be willing to consider relaunching quantitative easing again.
- Reserve Bank of India cut its interest rates twice in the last 5 months.
- Chile’s Central Bank stunned the markets by cutting interest rates 0.5% -its biggest rate cut in a decade.
- President Trump and Premier Xi have announced a meeting on the sidelines of the G20 summit.
- And finally, news outlets are reporting that in February 2019 President Trump explored the legality of demoting Chairman Powell.
Phew!!! Will someone pass the popcorn please. Whatever happened to the lazy, hazy dog days of summer when nothing happened!
Any missive on the importance of the absolute independence of the Federal Reserve Bank and the consequences of even a perception that the Fed was doing the bidding of the Politics du Jour will have to wait for another day. Let’s take a step back from all this fast-paced noise and focus instead on the essential picture – Central Bank Interventions. It is not that the central banks of all these economies are engaging in a coordinated global intervention. Each bank is focused on its own economy, but in the process, they are creating global central bank intervention (albeit uncoordinated). And this will have significant consequences for global stock and bond markets in the short-term and the long-term.