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Fed Meeting & Apple earnings

Video Script

Hi everyone, there’s been some turbulence in financial markets and that’s creating some big opportunities for trading. This week I will talk about the jump in gold alongside the latest surge in bond yields before this week’s Fed meeting – as well the 10% drop in the Nasdaq index before earnings from Apple, Microsoft and Tesla this week. Stay tuned!


Last week the yield on US 10-year Treasuries struck a 2-year high. As I’ve discussed many times in these videos – higher yields on bonds make both gold, which doesn’t earn a yield and stocks less attractive to investors. What’s interesting though – and possibly telling about future price moves – is that when Treasury yields went up this week, gold went UP not down.


Now, why might gold be rising? Well for one, gold is known as a haven asset and stocks have been falling over the past week or so. The other reason is the Fed and how they will respond to the 7% consumer price inflation.  If the Fed does too little, inflation could still far-exceed the low interest rates on offer, leaving gold in demand as a store of value. But if the Fed does too much, then that jeopardises the economy, adding to gold’s appeal as a haven asset. That means the Fed have to tread a very fine line to get their policy right to avoid a mistake. It seems investors might be choosing gold as a hedge in case central banks get it wrong.


Now while gold has been rising alongside bond yields, the opposite has been happening to tech stocks. The Nasdaq index, which is heavily weighted towards tech companies just entered a technical correction last week – which is defined as a drop of 10% from the most recent high.  The timing of this is interesting because this week some of the biggest companies in the world- which happen to be technology companies – report fourth-quarter earnings. Not only do these companies need to grow earnings ahead of analyst expectations, they also need to grow them enough to offset the worry from investors that rising interest rates will bring down the price of stocks in the sector with high valuations.


Before I turn to the economic calendar – some dates to keep in mind this week. Microsoft is the first among the big names to report results on Tuesday the 25th, Tesla’s numbers are out Wednesday the 26th and Apple reports after the close on Thursday the 27th.


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So let’s round things off with the economic calendar. PMIs at the start of the week are important. I’d point especially to Germany, where the composite PMI reading – dragged down by services - is entering contraction territory. That’s really a bad sign economically for Europe and raises doubts about how much tightening the ECB can be expected to do. The Bank of Canada sets interest rates on Wednesday first but the big one of course is the Fed later on the same day. The probability according to market pricing is now almost 100% for a March rate hike so this meeting is all about guidance from Chair Jerome Powell about whether March is indeed the time rates lift-off. Then just a final note that we have US Q4 GDP out on Friday, which could add to – or detract from - any reaction in markets to the Fed.


Right thanks everyone, good luck trading this week and make sure to click on subscribe so you don’t miss the next episode of the week ahead.


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