Don’t try to predict the unpredictable
The secret lies in managing your risk such that you won’t be wiped out in any such events.
The world is now very uncertain and in the shorter term, hangs in the balance. Will Israel be attacking Iran in retaliation? Or will the reprisal come in the form that is not an obvious attack?
Many experts and intelligence agencies better informed than us do not have an answer for this. The key is not to try to predict things which are pretty much unpredictable. The secret lies in managing your risk such that you won’t be wiped out in any such events.
As such, it is imperative to manage your risk such that the wild swings will not inflict too much pain and keep your powder dry so that you can take advantage of the chaos when the market overreacts.
Trading Tip
Ever-Changing Markets
The market is in a constant state of flux, much like it has always been. Successful trading hinges on recognizing that while the core principles of the market may remain consistent, the specific dynamics, such as market trends and economic conditions, are continually evolving.
As a trader, it's crucial to stay flexible and remain vigilant about changes in the market environment. By doing so, you can refine your trading approach to align with current conditions, helping you to capitalise on opportunities and mitigate risks effectively.
Day Ahead
Inflation data from Canada is slated to be released with the annual rate expected to edge higher to +2.9% in March from +2.8% in Feb. Core Median: +3.0% vs +3.1%
Trading Plan
1. Currencies:
Neutral
2. Commodities:
Uranium & Energy - Stay invested for now.
3. Stocks:
US Stock Index: The US Stock market closed lower as investors remain on edge, worrying about a possible retaliation by Israel. With fear and uncertainty remaining high, the market will remain highly volatile for now.
(For more timely info on our Trading plan, click HERE)
Single Stocks: TrackRecord Model Portfolio is tracking the broader market for now.
Key risks: Comments from Fed officials about their views on the possibility of interest rate cuts in the months ahead could influence risk sentiment.
What Happened Yesterday
Market Movements as of New York Close 15 Apr 24
Fedspeak:
Daly (current voter, known centrist): “Recent inflation data was not surprising. Inflation bumps along the way aren't particularly surprising. The worst thing to do is act urgently when urgency isn't necessary.”
(Daly did not add much to her views, remaining neutral in her stance.)Chinese GDP grew +5.3% on an annual basis (vs +5% expected), up from +5.2% in Q4’23. On a quarterly basis, GDP grew +1.6%, up from +1% in Q4’23. Unemployment edged lower from 5.3% to 5.2% as expected. However, Retail Sales rose less-than-expected +3.1% Year-on-Year (vs +4.5% expected) in March, down from +5.5% in Feb. The House Price Index fell -2.2% YoY in March, larger than the -1.4% fall in Feb. Reaction in the USDCNH to these data points was muted.
The US Treasury Yield curve inversion narrowed to 0.30% as the US 2-year bond yield rose +0.05% to 4.93% while the 10-year yield popped +0.13% to 4.63%.
The US stock futures about 0.5% higher through the Asian trading session on Monday as the market was relieved that Iran’s attack on Israel did not result in major damage and casualties. It then edged slightly higher following the release of the Goldman Sachs earnings. The S&P 500 futures was up +0.87% when the New York session began.
The US stock market opened higher from Friday. It then started to fall through the New York session as investors’ fears over possible retaliation from Israel with regards to the attack by Iran sapped the market’s strength. The S&P 500 finished -1.20% lower (high: +0.88%, low: -1.38%), the Dow Jones fell -0.65% (high: +1.06%, low: -0.86%) while the Nasdaq plunged -1.65% (high: +0.83%, low: -1.82%).
Goldman Sachs (NYSE: GS, +2.92%) popped on the day following a strong comeback in investment banking after a slowdown over the last 2 years. Earnings rose to $11.58 per share (vs $8.56 expected), in the first quarter, highest since Q3’21.
The crypto market fell along with the broad based risk aversion during the New York session. Bitcoin is down -3.88% while Ether is down -1.76%.
Headlines & Market Impact
Israel vows to ‘exact a price’ after Iran’s attack. Here’s what analysts expect could happen
Notable Snippet: “Right now, they certainly are seriously considering direct strikes on Iran, because that is a clearest path back to deterrence,” according to Ryan Bohl, senior Middle East and North Africa analyst at risk intelligence platform Rane Network.
But Israel will need to strike a delicate balance, he noted, highlighting that “they don’t want an overt conflict with Iran.”
The less risky tactic is a “covert escalation,” where the Israelis will be “looking for ways where they can get their shadow war back into the shadows with greater intensity,” Bohl told CNBC’s “Squawk Box Asia” on Monday.
Ahead of a War Cabinet meeting on Sunday, Israel’s centrist minister, Benny Gantz, vowed to “build a regional coalition and exact the price from Iran in the fashion and timing that is right for us.”
“Strategically, I think you will get a movement from Israel within a week,” said David Roche, president and global strategist at Independent Strategy, who does not expect Israeli forces to attack Iranian oil facilities as it would “displease all of their supporters” like the United States.
What we think: The geopolitical situation in the Middle East remains tense and any escalation will weigh on risk sentiment in the days ahead. Risk aversion is on the rise for now.
US workers seeking record wages to consider new jobs, New York Fed says
Notable Snippet: The lowest wage Americans said they were willing to accept to take a new job reached a record high in March, new data from the New York Federal Reserve showed on Monday.
The so-called average reservation wage was $81,822 as of March, up substantially from the $73,391 seen in the last report in November of 2023, the regional Fed bank said, drawing on data compiled from in its regular Survey of Consumer Expectations. The New York Fed said that rise was driven by men, respondents over the age of 45, and those without college degrees.
The report also found declining satisfaction with wage and non-wage compensation in March, while satisfaction with promotion opportunities held steady.
New York Fed data tracking reservation wage demands has shown a solid uptrend amid ongoing inflation pressures and labour market tightness. While inflation has been waning, price pressures remain robust and are driving workers to seek higher wages, while a strong need for workers has given employees more power to get their wage demands met.
Despite the higher wages being sought by workers, the New York Fed found that employers were offering lower starting wages, with the average offer at $73,668 in March compared to $79,160 last November.
What we think: This may result in further wage inflation and thus raise the prices of goods in the US, adding to fears of a resurgence in inflation.
Hong Kong regulators approve launch of spot bitcoin and ether ETFs
Notable Snippet: Hong Kong regulators on Monday approved the launch of spot bitcoin and ether exchange-traded funds (ETFs), asset managers said, following U.S. moves this year to bring these products to market.
Bitcoin was trading around 3% higher at 7:11 a.m. ET after a rough sell-off over the weekend.
Three ETF providers have been approved by Hong Kong’s Securities and Futures Commission (SFC).
ChinaAMC said that it had received regulatory approval for the provision of “virtual asset management services” and it is “actively deploying resources in the development” of a spot bitcoin and ether ETF. OSL Digital Securities will be a custodian for ChinaAMC.
Harvest Global and Bosera International have also received SFC approval for bitcoin and ether ETFs, according to the companies.
Hong Kong would be one of the first places in the world to approve an ether ETF. The U.S. Securities and Exchange Commission has not yet approved such a product and asset managers told CNBC last week they do not expect the regulator to do so.
Hong Kong has slowly been trying to make itself a regulated crypto hub to compete with places like Dubai and Singapore. It’s unclear whether mainland Chinese investors will be allowed to invest in cryptocurrencies via the ETFs.
What we think: Should Chinese investors be given access to the crypto ETFs in Hong Kong, we are likely to see another massive wave of inflows and thus higher prices in the crypto market.
Sentiment
FX
Stock Indices
Best,
Phan Vee Leung
CIO & Founder, TrackRecord