Whether a feisty Presidential debate is the reason for the STOXX to decline overnight may be a stretch. Nevertheless, as a leading indicator of investor sentiment, the NYSE will open down today. Perhaps the STOXX heard ECB’s LeGarde announced that overshooting inflation seems like good policy. Copycat.
The 20-SMA has remained above the 50 since April. After plateauing for two weeks, last week’s activity resulted in the 20 rolling over. If it falls to a crossover with the 50-SMA, the intermediate term risk-off question will be resolved.
The “smart money” has been largely short the US$. A squeeze is about to happen which will drive it higher as hedgers are likely to be forced to buy to cover (BTC). A record trade deficit, record government and corporate debt along with a decline in the US$ share of global currency reserves does not generate a lot of confidence. Rumors of its death seem ill founded as there has been no constructive replacement by the Euro or the Renminbi.
NYC is a microcosm of what is happening in areas that have imposed continuing and massive shut down. Bankruptcies are up 40% and a third of businesses are expected to never reopen. After reducing staff by 100,000 in April, Disney is laying off another 28,000 which includes executive level staff. Two thirds of the staff are part-time. Dutch Shell joins the foray cutting up to 9,000 due to weak demand.
Changing business to adapt to the Covid environment has been expensive. Management is not likely to undo the changes.
On the world stage, apparently capitalism is good if it is green according to the head of the IMF who wants to “fix” capitalism which seems to me a forced transition to socialist-lite which is never enough of a shift.
From whence comes the catalyst for a bear market? The banks are better capitalized than in ’07-’09. Without additional funding and various extensions for mortgagees, commercia mortgage backed securities are increasingly at risk of default. If you have exposure, consider eliminating it from your portfolios. Boston Fed President recently said defaults are very likely.
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