Tag: neoxian

Central banks have delivered 32 interest-rate cuts globally this year as a worsening U.S.-China trade war drags down global economic growth. Swap markets suggest we’re not even at the halfway mark for cuts yet.

Traders are expecting much more. Over the next 12 months, interest-rate swap markets have priced in around 58 more rate cuts, assuming central banks maintain their current trajectories in easing. Those cuts could total another 16% in global reductions.

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And when it comes to the US, the Equity and Bond markets have already priced in further rate cuts.  The Fed’s target rate range is between 2% and 2.25% after a cut of 25 basis points in July.  If Fed Powell doesn’t continue to cut rates, many on Wall Street (and Trump) are saying the Feds will cause the next recession.  A big part of this thesis is when the Feds raised rates four times in 2018 with the last one causing that massive sell-off in December (Merry Christmas).

The US Feds are in a tough spot because the US economy is actually still growing…just at a slower pace.  The economy expanded by 2% in the second quarter and consumer confidence is still near all-time highs. Based on the historical correlation between the stock market and consumer confidence once the index hits 100, consumer confidence may be about to dip, which could hit the retail space hard and evidently the stock market.

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But what’s going on around the world can’t be ignored, the global economy is slowing down.  And probably more important, the invert yield curve can’t be ignored either because it’s only predicted the last 5 or 6 recessions.

And so, from a fundamental standpoint, based on the continued rate cuts around the world, I expect the 10 yr bond to continue to move higher over time. However, from a technical standpoint, price is currently in a monthly supply zone. The chart suggests price will pull back, before moving higher.

On the daily chart, price should at least stall at these levels, if not react and move higher.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Two months ago, I posted

Look For Utilities and REITs To Continue To Outperform

During economic troubled times, Smart Money rotates into Utilities and REITs because they act like bonds, meaning the stock dividends are equivalent to coupon rates, the yield paid by a fixed-income security.  However, let me expand on this a bit more.  Utilities and REITs are usually drowning in debt, but during economic troubled times, interest rates go down, so debt obligations put less of a strain on cash flow and  more cash flow means consistent payouts of dividends.  However, let me expand no this a bit more.  Investors are looking for a return on their capital.

As of June 2019, the dividend yield for the S&P 500 was 1.85%. This is below the historical average of 4.41% and close to the all-time low of 1.11% observed in August 2000.

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So if investor can get a decent return on their capital from the equity markets, can’t get a decent return on their capital from bonds because interest rates continue to decline, the next best option is dividends.  The barriers of entry are tough in the Utilities and the REITs sector, so with little competition and residual income, dividends are payout out consistently.

Since I wrote that post two months ago, XLU, the SPDR Utilities Sector ETF an the XLRE, the SPDR Real Estate Sector ETF are both up 8%, while the SPY, the S&P 500 ETF is down 2%.

My favorite REIT right now is Innovative Industrial Properties

Innovative Industrial Properties…An Interesting Play In The Marijuana Sector – Part 2

but I’m waiting for price to get to the $64 level before I buy.

A REIT worth keeping an eye on is the ETF, the Pacer Benchmark Data & Infrastructure Real Estate (SCTR) which offers investors exposure to U.S. companies that generate the majority of their revenue from real estate operations in the data and infrastructure sector.  Demand for data storage real estate is being driven by cloud, cybersecurity and 5G communication services.  So you know this REIT has a bright future.  

The chart suggests to buy on a pull back at the weekly demand at $29.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Like every other economy in the world, the Japanese economy is slowing down.  But the Japan has one competitive advantage over most countries.  Japan is a very large exporter.  Now you might say China is a large exporter as well. But Japan has been one for many decades and as a result, has become the largest net creditor to the world.  So during times of uncertain, capital flows out of other currencies and into the Japanese yen, causing it to strengthen.  This is way the Yen is considered a safe haven currency.

With continued rife between the US and China, an inverted yield curve in the US, negative German bond rates, the Brexit deadline fast approaching, I remain super bullish on the Japanese Yen.  Lets go to the charts to see where the Yen might be headed next.

Monthly Chart (Curve Timeframe) – monthly supply is at 0.0103 and monthly demand at 0.00805.

Weekly Chart (Trend Timeframe) – the trend is sideways with upside momentum.

Daily Chart (Entry) – the chart suggests to go long if and once price breaches the the daily supply at 0.00953.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.