Weekly reviews

Fear rules the funds

The explosive rise in gold prices signals that fear has once again visited global financial markets. According to information leaked to the press, big traders are preparing for a more significant price reduction in stock markets. There are also growing concerns that the US Federal Reserve will lower interest rates over the next 12 months as a protective measure during slowing economy and declining markets. Despite these worries, and that concerns are generally justified, FortFS analysts believe that the bottom is near and we can expect moderate growth in global stock markets in mid-summer.

 

According to the Markets Research Department of FortFS, the risks of a significant new decline in stock markets are shifted towards the end of the summer of 2019, and it should not be expected until the end of July - August. The recovery of stock indices that we are seeing this week demonstrates that the US market and the global influx of investments in the USA, about which we have written in our past articles, still continue to gain momentum.

 

It seems that many guys shouted on TV that the American stock market could never recover after a rapid and deep fall in the autumn of 2018! However, in the spring of 2019 markets not only restored all the losses but also established new historical maximums.

 

In our studies, we analyze also the behavior of the VIX (Volatility Index).

 

Our adaptive pricing model and analysis of economic and political factors indicate that the VIX will continue to decline, and ultimately drops below the level of 14. We expect that this decrease in volatility coincides with the recovery of US stock indices.

 

This process will run synchronously until about the second half of July - the end of August. Around this time, we expect a sharp increase in the growth of the VIX to at least 20-22, as there will be a new stage of price reduction in the US stock market.

 

We assume that the US dollar index will continue its correction down to about $ 95. During this time, this decline will stimulate the rise in prices of precious metals. We do not currently expect the index to fall below $ 95. We should expect a rebound in the US dollar from 95, with a subsequent rise to $ 97.50 -98.00. There is a possibility that the USD will try to reach the mark of 100. Probably, these events will occur around the middle of July 2019.

 

We assume that if the issue of a truce between the United States and China and the issue of trade with Mexico are resolved before the end of the summer, the US stock markets can quickly reach new highs. However, if there are no positive changes in the negotiations, we expect that the new market collapse will come according to our model.

 

At the end of the summer of 2019, we expect the possible formation of a peak in the US stock markets and the subsequent moderate decrease in indices.

 

There are still about 30-50 days ahead before we begin to understand whether the market is moving according to the scenario of our model, or whether the new information will enter the markets and will change the scenario. Much can happen during this time and therefore we will monitor the situation and inform you.

 

The best that investors can do to survive the times of index volatility or price uncertainty is buying gold and silver near local minima. As fear penetrates the markets, precious metals will be in demand in the coming months.