Week in Review: 19-23 August 2024

Financial Markets

For the week, the main stock market indices were positive, with the S&P500 gaining 1.5% and the NASDAQ 100 up by 1.1%. The small cap index, the Russel 2000, gained even more (3.6%). However, this was not a week for new highs.

Gold is up marginally and closed the week at an all-time high of 2512$. In our opinion, gold will now consolidate around current levels. Silver gained 2.8% and is around the 30$/oz level - we are unsure about the direction of silver from the current level as it can either go towards 31$ or retrace back to ~27-28$.

The barrel of WTI fell 0.7% and sits around 75$ per barrel. WTI has been trading around an average of 78$ and on a range that is narrowing in amplitude. We still think that during August or September we might see a bigger move either to the upside (above 82$) or to the downside (below 72$).

Bitcoin is up by a massive 9.8% and is almost hitting resistance at 66000$.

The relative strength of the US dollar (DXY) fell by 1.7% and is reaching the support level around 100-101, which is coinciding with the 200-week moving average. The EUR/USD had another good week (+1.5%), while the USD/JPY fell 2.2%, sitting around 144$.

US M2 money supply has not been updated this week.

The national financial conditions index (NFCI) for the week of 12th August 2024 has loosened slightly (0.7%) and doesn't show particular signs of financial stress in the markets.

US bond yields fell this week, and now sit at 3.92% for the 2-year and 3.80% for the 10-year. The yield curve remains inverted but is getting closer to uninversion.

The VIX remains subdued and shows market complacency.

Comment Section

The much anticipated speech by Jerome Powell on the Jackson Hole Economic Symposium (22-24 August 2024) brought a change of narrative, where the risks of persistent inflation were replaced by fears of a cooling labor market.

A FED rate cut is now expected for the September meeting. IF we had to guess, we would say the cut will be 50 bps. Is this going to pump the markets to new highs, though the last quarter of 2024? Probably. In a subsequent phase, if the recessionary signs start piling up, the market will then correct significantly - bad news will be bad news. We believe this is the time to start preparing for such scenario, by reducing equity exposure or by preparing some extra cash to hedge your current positions.

Take care, and good luck.

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