EUR 471.54 For Business Accounts Only

The NAVIGATOR - MAY 2018 - US10yr-DE10yr Yield Spread Confirms Secular-Bull Stock Market Uptrend - Short-Term Correction Since Jan. - US$ Set For One Final Downturn Before Upturn - TIPS Inflation

In This Edition:        

Legendary investor Mark Mobius who managed funds for Franklin Templeton for more than 30 years has said ‘all indicators’ point to a large decline in the benchmark S&P 500 index – ‘I can see a -30% per cent drop – when consumer confidence is at an all-time high as it is in the U.S., that is not a good sign’ he added. This follows recent analysis by Saxo Bank citing several factors for a sizable correction of between -25% to -30% per cent including growing credit loans, a widening of the U.S. fiscal deficit, doubts over infrastructure spending plans and a potential trade war. Earlier last month, nine other experts waded in to the debate with more pessimism - Guggenheim: ‘shades of 1987’ - Canaccord Genuity: a ‘shock drop’ retest -Longview: ‘hope over reality’ - Goldman Sachs: warning signs of a -25% plunge - Sit Investment: investors in ‘denial’ - Russell Investments: ditch the U.S. for Europe in 2018 - Legal & General: 2019 recession risk - Bridgewater: ‘pre-bubble’ phase, and recession by 2020 - Cresset Wealth: a donkey pretending to be a racehorse. Now you might think we’ve been selective in pulling some of these quotes together, but then again, trying to find the bullish commentary that looks outside of the 5% per cent band is a hard task. The big question though, is whether there’s justification to be so bearish right now? In this month’s Elliott Wave Navigator report, we look back over the 1^st quarter’s forecasts and confirm that each of the four major price-swings evident in the S&P 500 have been predicted ahead of time and to within a few percent of amplitude targets. What does this tell us? It tells us that amidst all the talk of volatility and bearishness, these huge percentage price-swings are indeed predictable. Now that’s assurance going forward because there’s definitely more volatility to come, but this doesn’t translate into a direct decline as pundits seem to believe – a big upswing is already underway from the April 2^nd lows. This month’s report also takes a look at the developing picture several months from now, comparing the stock markets rhythm with the historical pattern development of the US10yr-De10yr yield spread – it reveals some amazing results which gives a picture-prefect insight for stock market trends for this year, showing from where the next peak and downturn will take place, and by how much, but also how it also confirms the secular-bull uptrend and when it will likely end.

The US$ dollar remains the focal point of discussion, particularly recently because of its link to the increase in inflationary expectations. Inflationary expectations are different to actual inflationary pressures and there’s also a difference between what exists now and what develops later. President Trump’s trade tariff mandate together with aggressive sanctions against Russia has caused some commodity prices to rise significantly over the last month, especially Crude Oil and core base metals like Aluminium and Nickel. It’s having the effect of pushing long-dated treasury yields higher and this is helping to maintain the US$ dollar index above the mid-February low. This month’s report examines whether the dollar’s upswing can continue, or alternatively fade. Bearish sentiment is building for the US$ dollar, with calls of persistent declines for the remainder of this year, but our analysis otherwise contends an attempt to a new 3½ year low will finalise last year’s 1^st wave downtrend, ushering-in a multi-month period of US$ dollar gains – that would really change the current scene for just about all the other currency pairs. This month’s report also updates the corresponding Elliott Wave patterns of the Euro/US$ but also takes a look at how the impact of Crude Oil is affecting the US$/CAD, how the changing political landscape in South Africa looks for the US$/Rand and how President Trump’s trade tariffs are translated into the US$/CNY. We also examine whether the U.S. breakdown in reestablishing the Trans-Pacific Partnership changes any existing trends for the US$/MXN, the impact on the US$/BRL from former President Lula da Silva’s imprisonment and also Russia’s trade sanction affecting he US$/RUR.