It’s all going down again – or so it seems from news out of Asia overnight. That is supported by oil price movements and the dollar. A fragile recovery is being pushed towards a crisis by political inaction. We have already mentioned our estimates of the shutdown and are publishing a follow up piece today. What else is going on in the market? What data release should investors look forward to, especially in the light of the shut down? After all, since of the government data releases are being suspended due to the furlough, what will the markets react to?
Gold has been down significantly in the past nine months and despite a quick tick up in late-August and early September, it is moving south again. We will look at gold as a market sentiment indicator. Spot gold was up 0.3% yesterday and ended at $1,314 per ounce. If the shutdown continues and as the date of the US default gets closer, we can see a sharp uptick. After all, what safer haven than yellow – it is the only thing that is worth its weight in gold. The instinct for ‘real’ stores of value will rise.
And so will safe haven currencies like the Yen and the Swiss Franc (along with, potentially, the British Pound and Euro). The Dollar has been steadily weakening against the Yen in the 1 month chart below.
While Eurozone and the British economy have its own demons to deal with, we see a strong affection for the Yen and Swiss Franc coming in to the markets in the near future. We are sure that the Japanese will not be too happy to see their currency strengthen as they try to improve their export situation, but it is still considered the global support currency. And if Yen is the global support, the Swiss Franc is the global bank – and this neutral financial powerhouse remains relatively unaffected by the crisis all around it.
The S&P 500 was up 0.71% or 11.84 points on Friday, while the Dow Jones Industrial Average moved up 76.10 or 0.51% on assurances from Speaker John Boehner that the debt ceiling will not be breached.