Stock market forecast august 2019
Latest update: 06-08-2019 14:05
A difficult month
The month started so fiercely that I just waited a moment to make a monthly forecast. The FED started to stimulate more at the end of last month. An interest rate cut and stopped reducing the balance sheet. It should have given a powerful boost to the stock markets.
Jerome Powell, however, made a mistake by saying that it would be a one-off adjustment and not a trend. Needless to mention that. He could have left it at the center and allowed hope and the associated positive feeling to persist.
Even worse is that all economic figures show that more stimulation will be needed later this year. A double mistake. Due to Powell, stock markets started the month not well.
The fact that Trump unexpectedly came up with new import rates the next day left the red color even more dominating. A few days later the answer came from China. No more American agricultural products and a lower Yuan.
The annoying thing about this month is that there is a lot going on. Even worse is that it are all things that play in the background and can suddenly cause an unexpected shock reaction.
Boris Johnson was the man in 2016 who, with great promises and some lies, made the British opt for a Brexit. He is now prime minister and will have to live up to it. An impossible task because the EU will never meet all his requirements.
Johnson continues to threaten with a hard no deal brexit. With that he has put himself in a difficult position. He can no longer accept a soft EU deal. But whether he can get the British government to agree to a hard brexit is questionable.
It will cause a lot of tension and hassle. Not sure it will play so hard this month. But in the coming period, the Brexit will again become main news.
Japan and South Korea
An old dispute from the second world war is playing again. As a result, the two countries are now also in a trade war. It seems less important. However, both countries are struggling with their economy. Then you cannot use this. It also acts as a brake on the Asian economy and therefore on the global economy.
The tension remains. There are two important issues. How safe are oil tankers sailing through that area? Too many attacks and the oil price will rise. It can also provoke counter-actions from other countries. The other issue is the Iranian oil supplies to China.
Iran must try to sell its oil after the boycott. China needs a lot of oil. Given the trade war with the US, China will not listen to the Americans and will be happy to buy all Iranian oil at a friendly price. Because China then purchases less oil from other countries, the oil price will fall.
In addition, the Americans will be furious that it will destroy their Iranian boycott. This gives China a negotiating advantage in the trade war. It remains difficult to predict the oil price. Due to the lower economic growth, demand will not increase rapidly, that is for sure.
An escalation around Iran and the oil price is rising. The Chinese buy all Iranian oil and the price drops. As a result, the oil price is partly linked to the trade war. Because if the Chinese want to bother the Americans, they will buy a lot of Iranian oil.
The trade war
No deal can be expected within a year. Or maybe I should say as long as Trump is president there will no longer be a deal. Further escalation is to be expected. From a trade war we also ended up in a currency war this month.
The next American step will be even more import rates. The Chinese can then respond to this by selling their American government bonds.
US and EU trade
To date it remains fairly quiet. Maybe Trump first awaits the brexit outcome. However, those American import rates remain above our heads.
The currency war
Trump blames the EU and China for their low currency. In the case of China perhaps partly justified. The EU is a different story. Our economy is doing a lot worse than the US. The better the economy, the higher the currency.
That call for a lower dollar remains. Last month, the US government decided not to lower the dollar. I do not expect that it will take a long time for the Americans to lower the dollar.
Then the currency war really broke out. The result will be a rapidly rising inflation and of course sharply rising gold and silver prices.
Doesn't seem like a big deal. However, things are getting out of hand there. Then there may come a time when China decides to intervene. That can cause a shock wave in Asia. Hong Kong, together with Singapore, is the financial heart of Asia.
This month they don't meet. We will have to deal with what individual members have to say. FED members, in particular, are known for the fact that they often make statements. To get stock markets a little higher, I expect FED statements that indicate multiple interest rate cuts for this year.
The gold and silver price
Last month and beginning of this month beautiful increases. A rate cut by the Fed, escalation of the trade war and the start of a currency war were excellent news for the gold and silver price.
However, it could all have been much better. If Powell had indicated that more interest rate cuts could be expected. Or if they had lowered the dollar. In the short term, the high dollar continues to affect the gold and silver prices. But I don't expect too long anymore.
Trump wants a lower dollar and what Trump has in mind is going to happen. In addition, US government debt continues to rise far too fast and economic growth is weakening. This also means a falling dollar.
Over the slightly longer term, we need more stimulation from central banks. A slowing economic growth in combination with further escalating trade wars will make more stimulation necessary.
Something that should be closely monitored in this context are the unemployment figures. When they rise, central banks will go into the highest gear and the gold and silver prices will rise very fast. The gold mine and silver mine shares in which I invest naturally rise much faster.
Recently we often receive emails from customers asking when they should sell. In that case, it are often customers who have become a customer upon introduction (gold mine website in early December and a silver mine website a few months ago).
A bit dependent on what they bought, they now stand at many tens of percent profit. If you are satisfied with a 50% profit and want to use the money for something, you can of course put that profit in the pocket. But I don't do that yet.
Given the economy and the upcoming actions of central banks, we have entered a powerful silver and gold bull market. Such a bull market will last 2 to 4 years.
If you want to know what can happen with the silver and gold price then it is best to look in 10 year charts (especially in 2011). In the case of silver mine and gold mine shares, these increases are a factor of 10 or more extreme. That's why I just stay in position.
I am also not going to try to increase my return by selling and buying back. Declines and increases are very unpredictable. A tweet and everything is upside down again. I just take interim falls for granted.
I will keep my goal in mind for 2 to 4 years. As long as the economy continues to weaken and central banks have to stimulate more and more, that end goal will also be achieved. For the gold price I have 2700 dollars as the ultimate goal. Indeed double that of now.
However, it is quite normal for the gold price to more than double in a powerful bull market. In such a situation, the silver price usually goes up by 400 to 500%. If you want to know in which gold mine shares I invest: click here. For silver mine shares: click here.
The stock market forecast for this month
There is so much above the market that it is difficult to establish an expectation. However, most things that play are negative or can turn out to be negative. The only positive thing is that central banks must take action. However, that is only possible in mid-September.
I therefore expect a lot of downward pressure beginning to mid-month. The closer we get to the central banks in September, the more hope there will be for more stimulus. It probably gives many buying opportunities until the end of this month.
I want to start using that. Because with the support of central banks, stock markets are rising fast again in September. Price list ETF website: click here. With daily updates I will keep you informed.
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The monthly forecast for the AEX
It is going to be important where the bottom comes. 534 has a good chance. But 530 also has support. It would be nice if the AEX made a floor at one of those two support points. Then the rising trend is still fully intact.
In December a bottom at 470 and 8 months later a bottom 60 points higher. Then you are talking about a second and considerably higher bottom. The proof of a strong rising trend.
From those 530 or 534 the AEX can immediately advance to the 600. Or actually much higher. Of that 470 in December, the AEX went to 585 and that is 115 points.
530 plus 115 gives a price target of 645. That suddenly seems a lot. So let's first see where the bottom will be and then focus on the 600.