Hedge fund guru Ray Dalio has recently reduced the odds of a US recession before the next election from 50% to 35%. The primary reason is due to the Fed’s changing stance. The Fed is now watching to reflate asset prices if they weaken further. In other words, the ‘Powell Put’ is alive and well.
But in Europe, the ECB may delay its own stimulus. Recall that the central bank dragged its feet until 2014/5 to implement the QE? It is waiting for the Fed to change its stance first before acting.
As such, the German DAX Index has yet to complete its base breakout. Prices are still languishing at the bottom beneath the 150-day moving average (see Featured Chart). A further catalyst is required to break this trend indicator. The resistance is observed at 11,600-11,800.
The CAC Index is performing better this year. Prices have rebounded all the way back to underside of its prior trading range. Again, it would take more bullish catalysts to hurl the index above this range.
The UK’s FTSE 100 Index has broken above the 150-day moving average but is currently consolidating at this trend indicator. Due to Brexit, the index could bounce around the 7,000 level until the fog clears.
Overall, European equity indices are likely to be choppier than the US due to a lag in the region’s monetary stimulus.
Compare Vetted Investing, Trading & Currency Accounts
|Investing Accounts||Trading Platforms||Currency Transfers|
Jackson has over 15 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.