Stock market this week
Latest update: 20-10-2019 19:35
A hectic week
Last week the focus was on the brexit and the earnings season. It remained calm around the trade war between the US and China. Both are working on the preparation of a first phase deal.
The US believes that the current import tariffs will remain and new ones will be added in December. The Chinese want to get rid of all import tariffs. Then a first phase deal seems impossible. However, as long as they remain hopeful in conversation with each other, we as investors cannot do much with it.
The problems in Hong Kong are not over yet. However, China is still not intervening. In my view, investors pay too little attention to the repo problem and the trade war between the US and the EU.
Last week, the amounts that the Fed is pumping in the repo market continued to rise. Last Friday, the US started import duties on many products from the EU. Because, apart from Airbus, many small non-listed companies in particular are being hit, investors are not bothered by it. Partly right.
But the EU has already indicated that it will propose countermeasures. Then you have to wait for an angry tweet to escalate everything immediately. This week seems to be going even more hectic than last week. I bought 2 ETFs in the J and K groups last week.
The rebellious EU colony
Great Britain was always a respected EU member. However, since the Brexit referendum, the British have entered a major political chaos. It reminds me of many of those former African colonies. There the people also wanted to become (rightly) independent.
However, the first years of being free and independent were always canceled out by an enormous political struggle for power. African national politicians who, completely out of self-interest, left the entire country in unprecedented chaos often including civil wars. With of course the African people as the big loser.
You can now see the same in Great Britain. British politicians are not at all busy with preparations for an independent future for the country. It is a political power struggle that divides the country with even the risk of a civil war in Northern Ireland.
As a result, Great Britain is currently degrading itself into a rebellious EU colony that does not know how to proceed without the EU. Perhaps my comparison with a former African colony is not entirely correct.
Because as far as I know, a prime minister from a former African colony has never send an official letter with a request to Europe accompanied by a personal letter not to accept the request.
The earnings season
To date, it is just a little better than expected. Obviously here and there big windfalls and disappointments, but that is every earnings season. However, slightly more companies than usual have to adjust their future profit and turnover figures downwards. However, no major dramas here either.
We still have to wait for a good picture of the industry and companies that are dependent on consumer spending. Only this week and the coming weeks will many of those companies come up with figures.
Those of the industry will be bad. But that is no surprise, because we already know that. More important are the companies that supply consumers. Consumer spending is currently the engine that drives the economy. That engine may not falter.
It is still too early to draw definitive conclusions. However, until now the earnings season does not seem to be able to cause a fall. Unfortunately, also not a rise.
Blowing off IPOs
It is striking that a large number of IPOs were canceled at the last minute in recent weeks. In a few cases that had to do with a situation around the company itself. However, in most cases there was nothing wrong with the company itself.
A year ago those companies could have been successfully listed on the stock exchange. But now it didn't work. The reason for the cancellation was in most cases a lack of interest from investors. The stock market climate would not be good enough.
That is something to really think about. After strong stock market falls and therefore very sombre investors, it is difficult to go public with a company. But there is no question of strong falls. Most stock exchanges are close to all-time highs or multi-year peaks.
Why don't investors want to put money in that newcomer? I think it is not a matter of wanting but of money. There is simply not enough money yet to invest in these new shares. The problems with the repo market naturally confirm that there is a lack of money.
Too little free money in circulation is the well-known canary in the coal mine. Because if small and professional investors are almost fully invested, who can still buy so that stock markets can rise even further? An even more annoying question is who can still buy should stock markets fall?
In the current situation it is to be careful. To keep stock markets and financial markets healthy, more money is simply needed quickly. That can also come soon. This week the ECB comes with a decision and next week the FED.
The last performance of Mario Draghi on Thursday. I do not expect a further interest rate cut. That is also not what the market needs. Making the money press run a little faster is necessary. But the question is whether the ECB will do that.
After the previous meeting, Draghi received strong criticism from a number of ECB members about switching on the money press again. If the ECB doesn't come up with anything this week, it's not so bad. The biggest lack of money is in the US. Next week's FED meeting is therefore much more important.
The gold and silver price
The chance of a hard brexit has increased slightly. The gold and silver prices can then rise. For the longer term, however, gold and silver in particular need FED actions. Interest rate cuts, printing more dollars and, as a result, a lower dollar, are going to raise gold and silver prices considerably.
The FED's turn next week. At a ECB decision, the gold and silver price will not do very much. Exciting weeks are coming for the gold mine and silver mine shares in which I invest. I am curious how much the profits have increased due to the increased gold and silver prices.
The stock market forecast for this week
The brexit can cause disappointing on Monday. If the EU starts granting an extension, it will take the pressure off the boiler. Boris Johnson has placed the EU with a strange choice with its various letters.
Delaying the EU opts for the British parliament and drops Johnson. Then Boris Johnson has lost the support of the British Parliament and the EU. Then he should resign. I'm still betting on new elections and possibly a new referendum.
Then there will be no more Brexit and investors will be relieved. The earnings season and the ECB can also cause some movement this week. But initially, that brexit condition is the most important. I will keep you informed with daily updates.
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The weekly forecast for the AEX
The AEX does not succeed in rising above 585. Another cautious attempt last week. The AEX, however, came no further than 582 and then had to return. The AEX has now been locked in the 530 - 585 bandwidth for almost the entire year.
Only when the AEX leaves that bandwidth is direction chosen. Normally I would now list a number of things such as the Brexit and the trade wars which, if successful, are enough to make the AEX rise above 585 and to 600.
However, I now add another condition. More money must be made available to have sufficient fuel to further increase the stock markets. That extra money cannot come from economic growth because that growth is declining.
That money will have to come freshly printed from central banks. Only when the ECB (Thursday) and more importantly the FED (next week) start printing more money, will stock markets get enough fuel to rise much further.
With investing in gold, silver or the mines you can bet on 2 horses at the same time. If stock markets cannot be stopt immediately during a fall due to insufficient funds available, you are in good hands with investments in gold, silver and the mines.
If stock markets go up fast because central banks are printing money en masse, then you are also good with investments in gold, silver and the mines. Because printing massive amounts of money results in lower currencies (dollars) and higher inflation. 2 things where the gold and silver price and the mining shares are going up fast.