082018 CGI Weekly Equities Strategy Update
Short-term political concerns remain elevated. US economic focus this week is on news from the Jackson Hole Symposium. How many increases in the Fed Fund Rate beyond a 0.25% increase on September 26th will occur this year, one or two? Comments by Fed officials at the Symposium will give us a clue.
White House economic advisor Larry Kudlow had confirmed overnight that the US and China will resume trade talks later this month, but he also cautioned that Donald Trump was committed to making sure the administration gets a good deal.
His remarks, made to broadcaster CNBC on Thursday evening, were followed by a report in the Journal, on Friday evening, that Chinese and US negotiators were drawing-up a road-map that it was hoped would lead to the conclusion of trade talks by the time of a multilateral summit between US President Donald Trump and his counterpart planned for November.
Meanwhile, Turkey was not far from investors' minds after US Treasury Secretary Mnuchin signaled a more hardline approach on Friday morning, saying that the US could impose more sanctions on the country if President Recep Tayyip Erdogan refused the quick release of the American pastor at the heart of the diplomatic crisis.
It was followed just before the close of trading in New York by a downgrade of Turkey's long-term debt rating from 'BB-' to 'B+' by Standard&Poor's. Nevertheless, the USD finished the session off its best levels against the Turkish lira, having gained 3.15% to trade at 6.0177.
The summer swoon for US, EU and Asian equity markets continued last week. Seasonal influences normally turn Negative from the third week in July to mid-October.
More signs of a seasonal peak appeared last week. In the US, Q2 earnings reports were strong as anticipated. Earnings by S&P 500 companies released to date were up 24.6%. However, unless a company offered positive guidance (Cisco, Wal-Mart), many S&P 500 stocks moved lower, particularly if a company offered negative guidance (Macy’s NVIDIA).
We still recommend that investors should reevaluate their current holdings, and pay close attention to the seasonal forces that likely will come into play in the short term. Seasonally, the next period of strength for US, EU and Asian equities comes into play in the month of October.
We are advising investors to invest along the seasonal trends:
- Buy US treasuries (10-Y’s and 30-Y’s)
- Buy Commodities (Oil; Gold; Metals; Agri’s)
- Sell European, US and Japanese equities
Creative Global Investments LLC (CGI) is a Multi asset Investment Strategy & Investment Research firm. Our focus is on providing a multi asset investment strategy research based on a proprietary dynamic research process.
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CGI LLC was founded in 2002, and is based in New York, New York, with additional offices in Luxemburg and Croatia.
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