The American dollar is ready to celebrate Christmas in a good mood! Contrary to concerns, the U.S. economy is not showing any signs of recession. GDP grew by 2.1%, consumer income is 0.1% higher than spending, and consumer sentiment was up to 99.3 by the end of the year.
It is worth noting the relief in stock markets after it was announced that consensus was reached in the US-China trade negotiations. Yes, so far we are only talking about the first phase of the agreement, but the main thing is that the ice has moved.
The figures are really surprising. World stocks have accumulated more than 10 trillion dollars, bonds, as a protective asset, are falling behind, oil is becoming more expensive, and even gold is sparkling.
A mirror image of the end of last year, when almost everything fell.
However, the U.S. repo market remains an open question. As we have already discussed, the repo market was under pressure in September, when interest rates in the U.S. money markets rose to 10%, which is more than four times higher than the Federal Reserve's rate. In anticipation of the end of the year, banks may be more reluctant to lend, which may force borrowers to try hard to get cash.
So why is the repo market so important? It underpins a large part of the US financial system, helping banks, companies and investors to have enough liquidity to meet their daily operating needs. The interest rate on repo transactions is usually close to the Fed's base overnight rate, but when investors become afraid of lending, or when the system simply doesn't have enough reserves or cash to lend to, the repo rate rises above the federal funds rate.
Trading in equities and bonds can be more complicated. This may limit lending to businesses and consumers, and if the disruption is prolonged, it will be a brake on the U.S. economy, which depends heavily on the flow of credit.
The financing gap in September did not spread to other markets. However, a prolonged disruption and a weak economy would increase the risk of contagion to other economies.
At the same time, the risks of counter-productive low interest rates in Europe have been talked about again. ECB board member Klaas Knot said that he is almost certain that the monetary policy with low interest rates will be maintained for the next five years.
"This worries me because temporarily low interest rates are very different from consistently low interest rates," says the president of the Dutch central bank.
"Our low interest rate policy could end up shooting itself in the leg. If people start to save more in response to low interest rates, it will further reduce inflation," summed up Knot.
What will be the position of the new head of the ECB, Christine Lagarde, is not yet clear. If she takes the dove side and the risks of lower rates in the EU increase, that is, deepen into the negative zone, next year will not be rosy for the euro.
The trading week will be short due to the celebration of Catholic Christmas in most of the world. Therefore trade decisions need to be made twice as carefully. As traders say, strong speculations can be born on the "thin market".
Oil prices remain under pressure at the beginning of the current trading week, but stay close to three-month highs in hopes of a US-China trade. The agreement, which will be signed in January, is expected that the U.S. will agree to cut some tariffs in exchange for a significant increase in purchases by Chinese importers of American agricultural products.
"Oil prices will continue to benefit from positive developments in U.S.-China trade," said Stephen Innes, chief Asian market strategist at AxiTrader. "With a more constructive global macroeconomic outlook than last year, oil is well supported by both fundamental factors and sentiment.
Although the number of rigs has been reduced as drillers cut costs to focus on returns, higher productivity means that oil production in most shale basins has risen to record levels this year.
The US Energy Information Administration forecasts oil production to rise to 13.2 million barrels per day next year, up from 11 million barrels per day last year and 12.3 million barrels per day this year.
At the same time, OPEC and the oil cartel allies agreed this month to increase production cuts in the first quarter of 2020.
Many investors are already on vacation, as the end of the year is not far off and trading is low, which may strengthen market movement due to lack of liquidity.
Aufgrund der geringen Liquidität, die wir bereits mehrfach erwähnt haben, lohnt es sich, auf den traditionellen Vermögensschutz zu achten. Um unvorhergesehene Umstände zu vermeiden, würde ein Großinvestor lieber in Gold in die Ferien fahren und so sein Anlageportfolio für die Ferien diversifizieren.
Die Beobachtung der Notierungen, seit die USA und China bekannt gaben, dass sie sich in den Handelsverhandlungen auf die erste Phase geeinigt hatten, schien Gold ein weniger interessanter Vermögenswert für den Handel zu sein. Aber wenn der Markt eine geringe Liquidität hat und jeder große "Player" sie pushen kann, ist die Sicherheit seines Kapitals eine Priorität.
Die Aktienmärkte in den USA und Europa zeigen nach einem so langwierigen Handelskrieg nicht überraschend eine offensichtlich bullishe Stimmung. Aber genau das kann eine Falle sein.
Daher sollte man den Schutz der Vermögenswerte nicht ignorieren.