It is strange to see both selling in long term bond yields at the same time as riskier assets also sell. Over the past few sessions, we have seen Crypto, Gold, Equities and some base metals all sell-off. Often if we see selling in bonds (bond yields going up) we see money flow into riskier assets. This for me just adds to the bullish sentiment in the medium to long term. In the short term, it seems that the political uncertainty in the US is seeing some investors go to the sidelines.
With more stimulus on the cards, the general feeling is this market is likely to continue higher. Valuations in the US are very overdone in many areas of the market, but with so much Fiscal and Monetary policy planned for this year, the bubble is unlikely to break just yet.
The next big thing that markets will be focused on is US company reporting which kicks off later this week. We will see some of the big US banks on Friday; JPMorgan, Wells Fargo&Co, and Citigroup. Reporting could trigger certain stocks to move largely as we get further insight into how well or bad stocks are going in this uncertain environment. Keep in mind people will be focused on future guidance more than current profitability.
The XJO is expected to open fairly flat this morning. By open, our futures may show weakness factoring in the pull back in the U.S last night. U.S futures sit flat to green, so if we see them push one way or the other today, our market is likely to follow.
We once again held our post fall highs near roughly 6750, pulling back yesterday to sit near 6700. The next move should be back towards the bottom of the channel at 6600. On the other hand, considering how we are lagging behind the U.S, if we see renewed strength in their markets, we may go on to retest 6750 and break it.
U.S reporting is starting up on Friday. Reporting seasons can often move markets. This time we will likely see how last year’s lockdowns, pandemic, and fiscal support has affected company balance sheets.
Overnight US shares closed lower, although movements were relatively small. US markets are about to go into an earnings reporting season at the end of the week and with shares trading at record levels relative to earnings, some are taking profits ahead of the announcements.
There was little in the way of economic data from the US, and we saw bond yields continue to rise. The US dollar is also starting to rise, which could weigh on share prices to some degree. Oil & Gas stocks continued their strength overnight, while Healthcare stocks also rose. Every other major sector closed lower, with tech stocks faring the worst.