US stocks appear stuck in a holding pattern until we get a meaningful trade update. Stocks drifted lower on Monday’s lack of liquidity due to the Veteran’s day holiday and President Trump’s weekend comment that there had been “incorrect” reporting on how ready the US is to roll back tariffs. With US stocks well into overbought territory, we could see continued geopolitical risk from Hong Kong or tough trade talk warrant a minor pullback. The bull case for US equities remains intact, it just doesn’t have a catalyst right now to warrant a significant move higher. Next year, the dollar could be in for some pain and US equities should be supported after Fed Chair Powell signaled at the last FOMC decision that Fed will launch further measures to get inflation higher. The Fed is still concerned about deflation and we will likely see further accommodation from policymakers in 2020.
Bolivian President Evo Morales’s resignation epitomizes the recent wave of change that is hitting Latin America. The end of Morales’s 14-year rule stemmed from clear manipulation of the October 20th election. Along with Morales, the VP, and heads of the senate and chambers of deputies all resigned. Democracy seems to be back in Bolivia and further momentum could see further pressure fall upon Venezuelan President Maduro. Sweeping change is happening in Latin America and we will likely see the rise of anti-government protests.
Oil prices are struggling at the start of the week as trade concerns derail some of the momentum we saw in October that a phase-one deal would deliver a boost for energy demand. Oil has hit some technical resistance and could see further short-term pressure on rising concerns that the oil market will be oversupplied next year as OPEC + may struggle to extend their production cut agreement in December.
Gold’s selloff is slowing starting to see long-term buyers jump in. After hitting a 3-month low, gold prices are seeing modest demand as trade concerns remain that we could see another collapse in talks like we did in May. While markets remain mostly optimistic we will see a phase-one deal signed this side of Christmas, markets can’t ignore the risks that something easily could go wrong. With US equities appearing to run out of ammo for a significant rally, we should start to see some demand for safe-havens in the short-term.
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With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya