1. The Bond Market Is Already Raising Rates
Fact: The Federal Reserve controls/changes one interest rate, and that’s the rate banks lend to each other overnight. The idea is that if the central bank can control that rate, it would impact all other rates.
Now, everyone and their grandparents are getting excited/nervous about the Fed raising rates in coming meetings.
Well, the market has already gone ahead and raised rates.
Have you looked at the yields on the 10-year and 30-year Treasury? Make no mistake: the bond market is massive, and it can move mountains.
2. Japan Could Be the Biggest Risk Nobody Is Watching
Japan is possibly one of the most ignored stories out there.
There are some serious records being broken for the country, and there could be consequences.
Yields on Japanese bonds hit 2.95% last night. If you had told someone a few years back that Japanese yields would hit 3%, you’d have been laughed at.
Plus, the currency is itching to go lower despite several interventions.
There’s a big carry trade here. Japan is one of the biggest economies in the world. It has all the potential to shock the financial system.
3. Stocks Are Holding Up But Rates Matter
The S&P 500 continues to trade above its 50-day moving average.
Don’t forget, Friday we get jobs data, so there could be some movement.
Also, we are entering the most volatile months for the stock market (generally September and October), so be mindful.
Lastly, investing 101: when it comes to valuing companies, interest rates play a big role. If interest rates go up or down, valuations get adjusted.
4. Gold Just Took a Big Punch in the Face
Gold got a big punch in the face on Friday. It dropped below its 200-day moving average. It was one of the biggest down days for gold since early June.
Gold was getting too crowded, and this sort of thing becomes very common when you have excited buyers.
We are watching $4,370 very closely. A break below $4,370 will make the chart look weak.
Our view: the lower the yellow metal goes, the better the opportunity becomes for those who are thinking long-term. In case of some liquidity event, gold likely gets hurt first, but the move following the event could be eye-popping.
5. Bitcoin, Canada, and Oil: A Lot Is Happening
Bitcoin is choppy, with very clear resistance around $82,000.
Lots of noise in Canada around the trade war with the U.S. Though encouraging GDP numbers were reported recently, with investments and exports growing. But also keep in mind that GDP is backward-looking data.
Will there be a meeting between the U.S. and Canada at the G20 meeting?
U.S.-Iran conflict flares up — oil at $86.