Risk level on Financial Markets
The last few days will be crucial for the financial markets, in particular, the currency market, the bond market, and the stock market. Particularly with the large-step approach of the mid-term elections of the American president. Some believe that if Republicans manage to keep the House of Representatives and by increasingly establishing a majority, the prices of the index dollars should explode. On the other hand if the Democrats manage to steal their seats, and to reverse them the trend, the prices of the dollar index will have to fall back. I'm not a political scientist or any of his policy considerations. The polls currently on voting intentions are rather favorable to the Democrats ' camp.
I present to you, a macroeconomic angle of the overall situation of financial markets by establishing a differential gap between currencies that constitute a bias of appetite for risk and a bias of risk aversion. It is, therefore a comparison between the market players who are riscophiles and those who are risk-averse. The least we can say is that currently we are in a status quo, in a neutrality because there is a lot of uncertainty in Europe with Italy and Germany, in the USA with the elections and the FED. The Turkish files are also pending as is the case of J. Khashoggi. So it's an uncertain global climate.
However, since financial markets are guided by three categories of assets, such as forex, bonds, and equities, I believe that it will be wise to interpret in our own way the comparison of the overall level between the assets or Currencies symbolizing the risk and those that are used for coverage. So we observe that since 2010, faced with the restarting of the global economy especially the USA, the lure for risk has increased. This meant that the bond market and the action market were complacent, were highly demanded. So it was an appetite for risk. On the other hand before 2010, from 2007 to 2009, market participants preferred to cover themselves in the light of the inherent risk and domino that took over world finance; 11 years later we find ourselves at levels of uncertainties. Still, if we move up, the indices and bonds will be highly sought after.
On the other hand, if we get out of this neutrality by breaking this slight bullish momentum that is underway, and we are going out the bottom of this range, the traditional instruments of hedging both the market of raw materials and the currency market (Yen and Gold, Swiss franc) will recover to be asked rather than be offered. This will mark the return of fear. To make the connection, you have certainly found that, through the possible overheating of the markets and the pace of rapid increase in interest rates by the FED, as well as the increase in bond yield rates, have literally made Advancing gold, from 1185 to 1235 in 2 days.
Finally, in conclusion of this analysis and interpretation, it would be necessary to be neutral until one of the two sides really manifest and then adopt an appropriate strategy. For example if the camp of the riscophiles outweighs, we will all buy some clues (S&P 500, Dow, Nasdaq etc...); But if it happens that it is the side of the Risk averse who wins, then the gold will explode, the Swiss franc and the yen progress, and the bond market probably will fall due to the current levels of all the national debts of the various large spaces Economic.
I present to you, a macroeconomic angle of the overall situation of financial markets by establishing a differential gap between currencies that constitute a bias of appetite for risk and a bias of risk aversion. It is, therefore a comparison between the market players who are riscophiles and those who are risk-averse. The least we can say is that currently we are in a status quo, in a neutrality because there is a lot of uncertainty in Europe with Italy and Germany, in the USA with the elections and the FED. The Turkish files are also pending as is the case of J. Khashoggi. So it's an uncertain global climate.
However, since financial markets are guided by three categories of assets, such as forex, bonds, and equities, I believe that it will be wise to interpret in our own way the comparison of the overall level between the assets or Currencies symbolizing the risk and those that are used for coverage. So we observe that since 2010, faced with the restarting of the global economy especially the USA, the lure for risk has increased. This meant that the bond market and the action market were complacent, were highly demanded. So it was an appetite for risk. On the other hand before 2010, from 2007 to 2009, market participants preferred to cover themselves in the light of the inherent risk and domino that took over world finance; 11 years later we find ourselves at levels of uncertainties. Still, if we move up, the indices and bonds will be highly sought after.
On the other hand, if we get out of this neutrality by breaking this slight bullish momentum that is underway, and we are going out the bottom of this range, the traditional instruments of hedging both the market of raw materials and the currency market (Yen and Gold, Swiss franc) will recover to be asked rather than be offered. This will mark the return of fear. To make the connection, you have certainly found that, through the possible overheating of the markets and the pace of rapid increase in interest rates by the FED, as well as the increase in bond yield rates, have literally made Advancing gold, from 1185 to 1235 in 2 days.
Finally, in conclusion of this analysis and interpretation, it would be necessary to be neutral until one of the two sides really manifest and then adopt an appropriate strategy. For example if the camp of the riscophiles outweighs, we will all buy some clues (S&P 500, Dow, Nasdaq etc...); But if it happens that it is the side of the Risk averse who wins, then the gold will explode, the Swiss franc and the yen progress, and the bond market probably will fall due to the current levels of all the national debts of the various large spaces Economic.
Francois Abley
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