Market Musings 080423: Charting The Markets

8th Apr '23 by Edmund Shing

7 comments 1544 reads

Market Musings 080423: Charting the markets

When a picture is worth a thousand words
(and when I don’t feel like writing much over a long weekend…)

Summary

Price pressure PMI components point to lower inflation ahead
GBP Sterling has been the strongest major currency over Q1 2023
US dollar looks set to follow US manufacturing activity lower
European company profit margins at a record high
Long-term asset class return expectations from JPM
Trend-following hedge funds are max short stocks at the moment
Nasdaq 100 still trending higher, Euro STOXX 50 back at year high
UK long-term bonds should rally, following US bonds
An interesting read on 35 years of financial crises and stock market reactions

Podcast: The Opec+ Oil Ambush

The facts
The crude oil price
Political tensions
What is your 12-month forecast for oil?
What is your current view on Commodities as an asset class?

Interesting charts I have found over the last few weeks…

I thought that this week, I would highlight some interesting charts that I have found over the last week or so, together with the conclusions I draw from them.

1. Price pressure PMI components point to lower inflation ahead

Source: Pictet AM

Conclusion: leading price indicators suggest that price pressures have essentially all but evaporated over the last few months. This suggests that inflation across developed economies should ease much lower in the months to come.

2. GBP Sterling has been the strongest major currency over Q1 2023

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Source: tradingview.com

Conclusion: despite all the doom and gloom surrounding the UK economy post COVID and post Brexit, sterling has been gaining versus its main trading partners this year. This underlines the fact that the UK economy may still escape a recession this year, with the domestic economy still robust and the housing market not collapsing under the weight of higher interest rates.

3. US dollar looks set to follow US manufacturing activity lower

Source: BCA Research

Conclusion: US manufacturing is in recession according to the US ISM manufacturing PMI survey, which stands today at well under…

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M48

8th Apr '23

Thank you for sharing this, Edmund. You summarised an awful lot here in an easy to understand way. Regarding chart 8, what do you see as the trigger for UK bonds to follow the US. I hear plenty about the Fed cutting US rates at some point but I’m not sure I’ve heard so much for the UK (sorry if that is overly simplistic non-economist thinking on what drives this), or is it simply the fact the chart shows historically the UK does eventually follow?

Silver Moon

Always interesting, today more than so. Many thanks Edmund.

LeicesterPete

Love the format of this article, like you say, the charts say a lot! Thanks

Douglas1971

Thanks Edmund, extremely interesting, explaining the situation with OPEC+ very beneficial, Jeffries article really added to the piece. Keep going everyone good times are ahead. Happy Easter.

Edmund Shing

9th Apr '23

Hi there

Regarding UK bond yields, the most convincing argument is that inflation will fall sharply in the UK over the remainder of this year, as in the US. Food prices and energy prices are already declining, and this should make its way into lower inflation. Higher interest rates should eventually cool both the housing and labour markets, with the greatest impact probably by early next year. Ed

mikebianchi

10th Apr '23

I really like the format along with others, easy to read charts with a logical and simple explanation. You should look back on this Edmund in two/three months time. Keep up the good work.

Epitychia

11th Apr '23

I find contrarian indicators fascinating. If short positions are high it means there has been a lot of selling already which indicates less selling in the future. However, it could also mean that the smart money can see big problems ahead and has already sold.

Hope you can do a short article on this sometime, it would be very useful.

Market Musings 080423: Charting the markets