Investing.com | Aug 22, 2017 07:00AM ET
by Pinchas Cohenh3 Key Events/h3
Today, global stocks opened on a shaky ground, as most Asian shares advanced on thin trading, with some help from a falling yen.
This week, investors are recuperating from fears of war with North Korea, US political volatility and recent European terrorist attacks, while at the same time, try to reassess their positions ahead of the central bankers summit in Wyoming. In the meanwhile, big name investors have begun reducing risk.
h3 Global Affairs/h3While European, US futures, and the MSCI Asia Pacific Index advanced on thin trading, the S&P 500 halted its two-day decline, revealing that some traders are taking advantage of low price levels. Their behavior doesn’t necessarily mean that the market agrees with their assessment, nor does it prove that they themselves believe prices will rise. It’s possible, but unlikely, that the President Donald Trump’s speech outlining a new strategy for Afghanistan was more than a coincidence, but rather a cause for the buying spree.
Trading volume dropped on the S&P 500 after falling 15 percent lower than the 30-day average. For traders who follow astrological analysis, this volume drop coincided with the first coast-to-coast total solar eclipse in almost 100 years.
After a weekly advance for the dollar and decline for gold, investors sighed in relief as North Korean tensions dissipated, but today the Hermit Kingdom threatened the US again, warning America will suffer “merciless revenge” for ignoring Pyongyang’s warnings over annual military drills with South Korea. So far, markets have been ignoring this, but to be fair—investors have not been trading. We’ll have to wait until volume picks up and the market becomes efficient again..
In a LinkedIn post yesterday, Ray Dalio, the billionaire founder of the Bridge Water Associates, the world’s biggest hedge fund, shared that he’s reducing risk on growing uncertainty due to both internal (President Donald Trump) and external (North Korea) conflicts “…leading to impaired government efficiency.” On top of the concerns Dalio pointed out is ongoing weak US inflation rates.
The thin market is not only because of bad things that already happened, but perhaps because of something that has yet to happen—the annual conference of global central bankers hosted by Kansas City Federal Reserve Bank at Jackson Hole, Wyoming. The global economy is at a crucial intersection of monetary easing, which central banks are hesitant to change course amid stubbornly tepid inflation rates.
While the ECB grapples with a tightening after the euro has reached multi-year highs, potentially hurting exports, the focus is expected to be on the Fed. Although, it will probably not be on whether there is an additional hike this year—whose chances have deteriorated due to the continuously disappointing inflation—but on the likelihood of Fed balance sheet reduction occurring relatively soon.
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