Category: Research Report

Categories
Research Report

Global Market – Third Storm

RBI Governor very well-articulated this crisis which will not only impact emerging market equity and emerging market currency, but also other developed countries from Europe which is currently facing high inflation problem.

In our column, we have many times discussed subject like “Double Whammy” equals to high inflation + high interest rate and another subject like “Europe – Epicenter of next financial crisis?”.  The way we understand third storm as a mixture of “Double Whammy” & “Europe – Epicenter of next financial crisis”.

Dollar Index is a reference point of Risk-On / Risk-Off indicator.

In case of economic turmoil, inflation concern or US Fed increase rate to historic high will trigger plight of currency to safe assets that is US bond market.    

In case of economic stability and expansionist monitory policy, money will flow to high beta currency, bonds and equity market where there strong possibility of high return. 

Equichain Wealth Advisors: Market View & Opinion

We believe, when RBI governor highlight something and that too in the opening statement of RBI MPC policy meeting outcome and draws the reference of its impact on our monitory policy.  In simple terms, it says how the world in connected to US Fed policy.

Click on the attachment to read the full report:
Global market – Third Storm.pdf
View Document
Categories
Research Report

Global Market – US Fed – Hawkish & Precises

US FED – Hawkish & Precises

Here we bifurcated policy action and statement from press conference of US Fed chair Jerome Powell after US Fed announce policy decision to understands its impact on global assets classes after US fed decision.

Global risk-off across the assets classes have been triggered after US Fed policy.  US Fed policy have triggered panic among global central banker as they rush to announce interest rate hike to protect their currency.  

Equichain Wealth Advisors: Market View & Opinion

We believe, market is now adjusting to hawkish & precise policy by US Fed as they are now ready to sacrifice growth and willing to see some pain to bring inflation to 2% over a longer period of time.  

Time to be prepared for crash landing, earnings season starting from 2nd week of October 2022 will be important event to watch out for before next US Fed meeting on 2-Nov-22. 

Click on the attachment to read the full report:
Global market – US FED – Hawiksh & Precises.pdf
View Document
Categories
Research Report

Global Market – US FOMC meeting 20 – 21 Sep

Global Market – US FED meeting outcome on 21-Sep-22

Before US CPI & Core CPI inflation data released on 13-Sep-22, there was probability playing on 50-bps & 75-bps and now Fed rate monitor tool is showing probability between by 75-bps & 100-bps.

Globally, financial market has not fully factored in 100-bps rate hike and on 21-Sep-22, if US FED increase rate by 100-bps there is negative reaction across assets classes.

US 2-year bond yield @ 3.90% inverting US 10-year bond yield – Indicating recession?

US 2-year bond yield inversion compared to 5-year & 10-year bond yield also increase the probability of recession in near term.

U.S. mortgage rates have doubled this year & have now climbed past 6% for the first time since November 2008.

Equichain Wealth Advisors – Market view & Opinion

We believe, US FED would increase rate by 75-bps which could provide relief rally in global asset classes.  Any surprise moves to increase rate by 100-bps would send market another round of selling pressure across global asset classes. 

Click on the attachment to read the full report:
Global market – US FOMC meeting on 20 – 21 Sep.pdf
View Document
Categories
Research Report

Global Market – Price cap on Russian oil & OPEC+ nations cut output

This week we will discuss the OPEC+ countries declaring output from October 2022 and US & Europe planning to put cap of Russian oil.  US & Europe have put sanctions on Russia and limited their purchase from Russia have triggered Crude oil prices soaring from 24-Feb-22 onwards.

Crude oil is currently trading around prices seen before 24-Feb-22, Russia-Ukraine crisis begins.  WTI Crude oil near $85 and Brent Crude oil near $90.  Average crude oil prices during 2015 – 2019 were trading in range of $55 to $70.  

OPEC+ Agrees To cut 100,000 bpd from October 2022

The group will reduce production by 100,000 barrels a day next month, taking output back to August levels.  Its next scheduled meeting is on 5-Oct-22 to discuss further steps.

Russian Crude oil – Price cap proposed by G7 nations

US & European nations (NATO nations) have put various sanctions on Russia after Russia started its military operation in Ukraine on 24-Feb-22 which is currently going on till date with more than 6 months.  

Equichain Wealth Advisors: View & Opinion

G7 nations planning to cap pricing will not be successful unless India and China join them and current geo-political situation it seems highly impossible.

Click on the attachment to read the full report:
Global market – Price cap on Russian oil & OPEC+ nations cut output.pdf
View Document
Categories
Research Report

Global Market: ECB monitory policy 8-Sep-22 & Energy crisis in Europe

This week we will focus on ECB monitory policy meeting on 8-Sep-22.  Currently ECB key rate stands at 0.50% whereas latest inflation numbers released for August for EURO zone at flash CPI came @ 9.1% Vs expectation of 9.0%.  Core CPI inflation came @ 4.3% Vs expectation of 4.1%.

Energy Crisis in Europe

Energy prices have soared in Europe as Russia has slashed natural gas supplies to the continent, with fears of more drastic cuts in the winter amid tensions between Moscow and the West over the war.

Equichain Wealth Advisors: Key points

Central banks across the world were following similar monitory policy to fight demand slowdown & lockdown post COVID-19, but as things have turned normal, different regions have different issues and solutions also need to different accordingly.

Biggest game changer for Europe is sanctions put on Russia by US & European countries to isolate Russia economically, but it backfired and worst impact is now seen in Europe.  US & RUSSIA, currency of both these countries have been strong post Russia-Ukraine crisis.

Global central banks have to choose pain & tight monitory policy for long term sustainable growth and bring inflation under control.   Country which will manage to bring inflation under control will be first to return to accommodative interest rate policy.

Click on the attachment to read the full report:
Global market – ECB monitory policy on 8-Sep-22.pdf
View Document
Categories
Research Report

Global Market – Jackson Hole Symposium

Today we will discuss, US Fed chair Jerome Powell speech at Jackson Hole Symposium and cues leading to US FOMC meeting outcome on 21-Sep-22.  Here are some of the key points from his speech on 26-Aug-22.

• Powell: Will require restrictive policy for some time.
• Powell: September rate action will dependent on upcoming economic data.
• Powell: Lower July inflation data is welcome, but not enough to change view.
• Powell: Need some more evidence before of inflation cooling off.
• Powell: overall inflation target remains at 2% for long term sustainable growth.
• Powell: Restoring price stability will take some time.
• Powell: History cautious against prematurely loosening policy.

Equichain Wealth Advisors: View & Opinion

Before we share out view, we would like to highlight the rally which started from 17-Jul-22 to 18-Aug-22 was based on narrative that US Fed will manage soft landing and corporate earning will not be hurt as much earlier anticipated in May & June 2022.

Today’s speech highlight was reference to history, which clearly says that early reversal of policy path could prove to be more disastrous.  Like US Fed waited too much to reverse easy monitory policy unless US Fed see’s clear sign of inflation cooling down, US Fed will continue its tight monitory policy.

Click on the attachment to read the full report:
Global market – Jackson Hole Symposium.pdf
View Document
Categories
Research Report

Global Market – Dollar Index @ 108

Dollar Index – Composition

The U.S. Dollar Index contains six component currencies: the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

How is DXY weighted?

It is a weighted geometric mean of the dollar’s value relative to following select currencies: Euro (EUR), 57.6% weight. Japanese yen (JPY) 13.6% weight. Pound sterling (GBP), 11.9% weight.

Dollar Index – Indicator of Risk-On / Risk-Off

Now let us discus the movement of Dollar Index in last 25 to 35 days.  Dollar Index made high of 109.14 on 14-Jul-22, a day after US inflation for June 2022 which came at 9.1% fearing of US Fed could increase rate by 100 bps in 27-Jul-22 FOMC meeting.  

Equichain Wealth Advisors: View & Opinion

We believe market is due for correction in month of September 2022, it will important to see what is the reason for correction “Profit booking” or “Recession fear is back” change in narrative.

Click on the attachment to read the full report:
Global market – Dollar Index @ 108.pdf
View Document
Categories
Research Report

Global Market – US Inflation – IS worst behind?

Global Market – US Inflation – Is worst behind?

Last week we have discussed that how Bank of England warns for long recession ahead starting from Q4 2022 to Q4 2023, 5 straight quarters of economic contractions.  BOE have also warned inflation could rise to as high as 13% and expected to peak in October 2022 around this level.

This week, we will discuss how market is reacting to US CPI & Core CPI data released on 10-Aug-22 & PPI & Core PPI data released on 11-Aug-22.  Before we discuss the details let us understand the definition.

Equichain Wealth Advisors: View & Opinion

Here we would like to believe, that rally in equity, commodity & currency could be judged as correction in bear market.  At the same time rally across is backed by positive corporate earnings in US and other countries including that of India.

Click on the attachment to read the full report:
Global market – US Inflation – Is Worst Over.pdf
View Document
Categories
Research Report

Global Market – BOE warns of long recession

This week we will discuss rate hike by Bank of England and BOE guided for long recession.  In our 16th July 2022 article, we have discussed is Europe epicenter of next financial & economic crisis?  We will continue to focus on Europe in today’s article.

BOE increase rate by 50 bps to 1.75%.  Biggest interest rate hike in 27 years.

Why crisis in Europe could be the next epicenter?

After Russia-Ukraine crisis in February 2022, which was followed by sanctions on Russia by US & European nations.  It triggered prices sky rocketed for food and energy where Russia & Ukraine was key supplier.

Interest rate, inflation and recession are the factors which will sooner or later impact corporate earnings, economic impact on individual as high inflation will impact purchasing power going ahead.  US Fed’s objective to bring long term inflation to 2% for sustainable economic growth.

Click on the attachment to read the full report:
Global market – BOE warns of long recession.pdf
View Document
Categories
Research Report

Global Market – Will US Fed manage soft landing?

Will US Fed manage soft landing?

So, what is soft-landing and what is hard-landing.  US Fed primary object currently is to bring long term inflation around 2% and inflation target for 2022 is at 4.6%.  Last US CPI & Core CPI data released on 12-Jul-22 came at 9.1% & 5.90% respectively.

After tapper tantrum in 2013, where US Fed moves to control inflation led to financial crisis led by sudden sell-off in equity, commodity and emerging market currency.

Soft landing: US Fed wants to bring inflation down without causing financial crisis.

Hard landing: Repeat of financial crisis led by sudden monitory tightening by US Fed followed by other central banks.

In June 2022, global market including India was near 52-week low and stocks specific correction up to 50% to 70%.  Since then, data continue to remain at elevated level, but narrative have changed as some easing is seen in commodity prices.

Click on the attachment to read the full report:
Global market – Will US Fed manage soft landing?.pdf
View Document