Will investors remain ‘Risk On’?

Will March be a month of reversal? As February about to fade into history, let’s recapped the main market action this year.

  • The past eight weeks saw rallies in most equity indices. Some completely erased the second leg of last year’s losses, such as S&P 500 (see SPY in Featured Chart), Dow, and Nasdaq (see QQQ below).
  • Emerging markets also did well, such as China, which is trying to end the tariffs war. As a result, its stock market shot up (see CSI 300 Index below).
  • Gold did well. Palladium surged to new highs. Crude Oil advanced, albeit hesitantly.
  • Bonds were generally firm, as investors digest the Fed’s stance.

So, what will the next two months bring?

  1. Unless we see major bullish catalysts emerging – such as better economic data flow – stocks may see-saw at current levels. The ‘Risk On’ mode in Jan-Feb were brought about by an oversold sentiment, which has now been erased.
  2. Overbought instruments, like Palladium and other stocks, may correct.
  3. Await new monetary signals from central banks. The Fed ended 2018 on a hawkish note, ie a hike in Dec-18, but completely changed its mind a few weeks later. Investors are waiting if new monetary stimulus will emerge from the major central banks (Fed, ECB, BoJ, BoE, or PBOC).

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