The Analytical Department of FortFS studied economic and political information about the economies of major regions of the world to determine what to expect in the next 90 days in the global stock markets and how it will affect the US stock market, where the main investment capital is still concentrated.
According to our forecasting system with adaptive dynamic modeling, we will still see increased volatility over the next 90 days, and swinging prices can become the main market behavior during the remaining part of 2019.
According to our research, the basis of price volatility over the next 90 seconds is the principle of the capital shifting from zones of uncertainty to zones with investment attractiveness. It is this process of shifting capital around the world that will determine price fluctuations until the end of 2019.
In the period of May 23–26, 2019, the European elections will be held in 26 EU countries. The election results will determine how the BREXIT problem will be solved, the prospects for the EU internal and external economic policies, as well as the political course of the leading European countries. The global strengthening of the US dollar and the weakness of EUR and GBP over the past weeks are associated precisely with speculation around possible election results. As we can see, the capital preferred to withdraw from currencies with political and economic uncertainty into the US dollar - the world reserve currency.
At the same time, the escalated confrontation between the United States and China, casts doubt on the prospects for profits of the world's leading corporations on both sides of the ocean. The negotiations failed, revealing the uncompromisingness of both sides in the desire to achieve benefits at any cost. As we predicted in our previous articles, the stock markets of the USA, Asia and Europe have already reacted with significant losses and are now frozen in anticipation of new information. Thus, according to our modeling global capital movements, we see that currency markets are trying at this moment to react and move away from the risks of future expectations, while the stock markets of the USA, Europe and Asia react to today's news, events and the economic forecasts arising from them. Accordingly, until a clear political plan is found to solve the problems between the US and China, news bursts will sway the world stock markets from side to side and stimulate bursts of volatility.
The coming 2020 is the year of presidential elections in the United States and the political race has already begun! President Trump is already under tremendous political pressure and the pressure will grow. Democrats are doing everything possible to put their proteges on the post of the future president. Scandals around the Department of Justice’s investigations into significant figures of the US political establishment are gaining momentum and are part of the election race strategy. Over the next 12 months, political scandals will become a real weapon in the hands of candidates. Information in the media about investigations and corruption will stimulate increased volatility in the US stock market.
Markets will respond to this volatility through an assessment of current risks and adjustments according to future economic expectations. So, there will be a permanent assessment of currencies among themselves in order to avoid settlement risks in a weak or unstable currency. The capital will go to those instruments for which you can pay the most stable currency. Also, the capital will move to the regions where you can get a loan in this most stable currency. There will be a reassessment of the stock market for the effectiveness of investing in the shares of companies in a particular region, and if, for example, the riskiest markets in developing countries satisfy investors in terms of risk / reward ratio more than the US market does, capital will necessarily flow there.
In general, the US dollar has steadily strengthened over the past 15 months, mainly due to global uncertainty. In fact, the dollar regained the status of a reserve currency. How long will it last? We are sure that now the markets are only at the very beginning of the cycle of increased volatility and this may sooner or later hit the dollar. In this regard, we are confident that the price of gold should grow in a strategic perspective, even despite current strong positions of the dollar.
Our analytical models predict instability in the stock and currency markets until the end of 2019, and possibly during 2020.
At the same time, it is strategically possible to assume that the mature markets of the USA and Europe should better survive difficult times than the markets of the EM countries and the markets of Asia. Thus, in the long run, even with the downturns in mind, the US and European markets should show higher returns than other markets.
Over the past year, the markets of South America, Asia and the Caribbean have fallen significantly in their capitalization and the capital of investors is now moving from these regions to the United States.
We expect a decline in global markets by the middle of the summer of 2019, which will certainly lead to an increase in gold prices. The reason may be the unresolved trade problems of the United States and China, the escalation of the conflict around Iran, the scandals around the US presidential elections and many other factors that the general public does not know yet, but which will be derived in due time through the mass media and explode volatility.