Will Geopolitical Tensions Drive Fundamentals in Favor of the Stocks this Summer?
The light bull sentiment on stocks looks like it comes with an expiration date.
With the Federal Reserve ready to increase interest rate due to the increase in inflation, now the markets are sensitive to geopolitical and trade frictions but also to military confrontations.
The U.S should try to ease the markets by convincing the EU and China to accept the cooperation in quickly balance out the affairs with America.
President Trump faces the challenge to reduce trade frictions and geopolitical confrontations in Eastern Europe, the Middle East, and East Asia.
According to Blackstone’s Joseph Zidle, there is a great possibility that rising inflation will tear into corporate profits and stretch consumers within the next 12 months.
“As we get into 2019, this earnings cycle is going to run its course. The earnings growth will have to slow because the year-over-year comps get so tough,” he told CNBC’s “Futures Now” on Thursday. “When you’ve got slower earnings growth and higher interest rates, that’s going to knock down equity valuations.”
Now despite his defensive outlook for 2019, he believes that it might be early for investors to look for bearish clues because of macro headwinds like North Korea tensions which may drive most probably fundamentals in favor of the stocks this summer.
“When you’re lifting up the hood on the earnings story, it really tells you they’re quite healthy. So, I think the fundamentals are going to ultimately win out here,” said Zidle. “I’m optimistic. I think the second half is actually going to be a very good environment for equities.”
Zidle also said that many investors are sabotaging themselves right now by closing overweight positions in stocks.
“Investors are overweight fixed income, and they’re intermediate to long-term durations. So, they’re not positioned for that rise in rates,” Zidle said. “They are taking duration risk at a time when they ought to be the very short duration and taking credit risk.”
EURUSD Technical Outlook
Based on the Ichicoku system it can be observed that the price is clearly below the kumo the tekan sen and kijun sen are in bearish formation and chikou span is below the price.
To start looking for any potential bearish signals we need to see the price reversing to tekan sen.