Global stock market sell-off continues after attempt at a rebound in the US faded quickly yesterday turning in to more downside pressure.

Markets: Global markets and risk-assets are down. Cryptos continue to tumble together with economy sensitive commodities while safe-haven assets like US Treasuries and the Swiss Franc together with the Yen benefit.

My view: While I observed the market reaction yesterday, a fail of the rebound loomed quickly.
The Sentiment index, Fear and Greed Index by CNN, is now already on “Extreme Fear” level which usually indicates a buying signal. However, as holiday season with low liquidity in the markets approaches, I prefer to stay on the sidelines before adding more risks to my portfolio. I keep the lately opened short positions as well as the trade on volatility, tracking them closely to reduce those bets in the near term in case of market stabilization.

Global stock market tumble following the US stock markets lower after the Fed release yesterday. The US central bank cut the key rate by 0.25% as expected. However, the Fed is likely to cut interest rates less than previously anticipated in 2025 as inflation persists.

Markets: US Dow Jones Industrial Average closed over 1’100 points lower adding to the streak of 10 consecutive days with losses, the worst since 1974. Nasdaq was down almost 4% while interest rates ended higher with the 10-year Treasury yield above 4.5% again. Asian and European stock markets followed the US currently trading down. Commodities, gold and silver tanked as well while volatility soared.

My view: as highlighted already during the last days, the potential for a correction is around the corner as too much of optimism was priced in. Therefore, this sharp move lower of US stocks does not come as a surprise to me as well as the spill-over on global stock markets, gold and silver, mentioned as well.
The good news about, the US economy is doing well as the speed of the rate cut cycle can be lowered.
I keep the wait and see stance if the euphoric buyers and optimists are coming back to the market right away or the correction has some potential to continue. Right now the US markets is set for a small rebound. Let’s see if this rebound is only of technical nature or attracts more buyers again.

Investors are somewhat puzzled by the 9 straight days of losses. While US equities churn near all-time highs, one of the closely watched indexes in the US shows its worst losing streak since 1978. The Dow Jones Industrial Average has fallen for 9 consecutive days.

Markets: US Dow Jones Industrial Average closed lower for 9 straight days while Nasdaq climbs to new record highs.

My view: Nothing to panic yet. The Dow is a stock price-weighted index. The shares of UnitedHealth have been primarily dragging the index down. While notable gainers including the tech members Microsoft, Apple and Amazone were not able to absorb the negative impact.
I do not see this as a buying opportunity. As mentioned before, US tech stocks show an overbought level with the pure optimism. Such kind of news could suddenly change investors’ sentiment and lead to some profit taking.

All-in stance on US equities. The latest survey of fund managers released by Bank of America shows record low levels of cash. Investors push US equity indices to record highs on pure optimisms since US presidential election and the Trump victory.

Markets: US equity indices reach new record highs almost on a daily basis.

My view: the skyrocketing tech stocks combined with the low cash level I rather take as a contrarian indicator. Stocks correction can be around the corner any time soon. However, the momentum can still last for more days. A fact to keep in mind, that during the holiday season, the market liquidity is going to be on a reduced level. Therefore, bigger moves in either direction could be expected.
After the big run of US equities, reducing some positions to rise some cash could be of advantage. At the same time I added some short positions with some lately skyrocketing stocks like Palantir, AppLovin, Netflix, Arista Network, and latest addition Tesla, while I keep the short on Nvidia. Furthermore, I expect an increase in volatility. To benefit and for some hedging purpose I added an ETF on long volatility.

Investors eye on the release of the US Federal reserve (Fed) policy decision on coming Wednesday evening. A interest rate cut of 0.25% is widely anticipated.

Markets: Investors and markets are rather calm and in awaiting stance. Asian and European equity markets are trading sideways in negative territory while US futures, mainly tech, are gaining ground by optimistic investors. Same picture on the currency front and for interest rates, trading sideways in a narrow stance.

My view: A rate cut by the Fed is already priced in. The primary focus will be on policymakers' outlook for next year depending on the economic growth and persistent inflation. Currently, the market prices in a moderate interest cut cycle for 2025. Any disappointment in the communication on the pace of rate cuts could lead to a profit taking stance in elevated US equity markets, especially in tech stocks. Global markets may then be dragged down as well.

The European Central Bank (ECB) cuts the key rate by 0.25% (as expected) to 3%.

Markets: Euro continue to weaken against the USD. No impact on equity side.

My view: As I wrote already in my blog article “Europe, the struggling candidate – time for the pole-position, finally?” (15.07.2024), the European economy remains fragile due to several reasons. Furthermore, the ECB remains in an unfavorable position. On one hand, to fight against inflation which remains elevated in the European region. On the other hand, being less restrictive in its monetary policy to support the struggling economic environment. Therefore my view remains unchanged - no big potential for European equity indices in the mid-term, however, selectively remain invested.

Swiss National Bank (SNB) cuts key interest rate by 50bps, analysts consensus expected 25bps.

Markets: Swiss franc (CHF) weakens against major peers. Swiss equity indices see a smaller gains after the announcement.

My view: Even SNB surprises with the bigger than expected rate cut, I see the market impact rather short-lived. The currently priced-in expectations of negative interest rates in 2025 seem exaggerated. Therefore Swiss equities might continue to lag as other regions remain more in focus. Currency wise, the Swiss Franc will not lose much more ground from here as other central banks remain in the rate cut cycle too, as ECB at noon today.

US inflation rose to 2.7% in November, matching analysts forecast. Up from 2.6% the month before and 2.4% in September, investors expect a rate cut by the Fed in December.

Markets: US tech stocks edge higher reaching new record levels. Gold and silver benefit while US interest rates fall.

My view: US markets, especially some tech names look overbought. Too much of optimism? Take profit stance leading to market volatility could rise into year end.