Simon Götschmann, Managing Partner ARKUDOS
1
Historically the central banks' interest rate hikes have had an effect 15-18 months after the first steps. If this is also the case this time, we are likely to see the first signs of an economic slowdown now. Yields on 10-year government bonds are already consolidating after the recent strong movement. If the economic slowdown is reflected in the upcoming economic data, particularly the labour market figures, the Federal Reserve is likely to leave interest rates unchanged at its November meeting. The narrative that the cycle of interest rate hikes is now over is likely to return and give equities a boost, at least in the short term.
2
Since 1967, before the Yom Kippur War in 1973, none of the 10 major military conflicts in which Israel has been involved has had a lasting impact on oil prices. The recent sharp rise in oil prices has recently caused inflation concerns to flare up. Inflationary pressure from this side should now ease. Venezuela's return to the oil market should also ensure this. Venezuela's communist regime is once again allowed to sell oil to the United States. The US administration is suspending sanctions against the dictatorial government of Nicolás Maduro until mid-April 2024 for the time being.
3
The technical and sentiment indicators point to an oversold market. For example, the put-call ratio is a useful indicator of stock market movements on a 3-month horizon. When fear is high and triggers excessive demand for puts, this tends to lead to higher stock returns in the following three months. The 1-month puts are trading at the highest relative levels since the debt crisis in the spring. The volume and prices paid for downside protection are a contrarian buy signal. Other often used indicators are the Relative Strength Index RSI or the sentiment barometer CNN Fear & Greed Index. Both indicate an oversold market and extremely cautious investors, which in turn can be interpreted as a buy signal.
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