US futures are trading flat while the investors have experienced another volatile quarter. More uncertainty is surrounding their decision and they remain unsure when will the Fed will increase the interest rate given the fragile nature of the economic data. Having said that, yesterday’s personal income data and housing number were roaring. But once again, it all boils down to one reason that the consumers should invest more given they have more spending power due to the fall in oil price and somewhat increase in wages.
Perhaps, one of the major reason which is holding consumers to spend more is the uncertainty around the Fed rate hike. Miss Yellen has delivered very mixed signals so far, and there is no clear time frame when the interest rate could be rising. We believe this is holding investors from spending. As a consumer, when you know that a rate hike is going to put more burden on your income and yet you are not sure how much it will increase by, so one of the decision which you are inclined to make is to save more and protect yourself against that uncertainty. We do strongly believe this is the vital reason for consumers which is holding them back to spend as their purchasing power goes up.
Back in Europe, we are about to finish the quarter with a Big Bang and the DAX index is without any doubt has made the loudest noise during this quarter. Thanks to the ECB quantitative easing and those who learned that it is not fruitful to fight the central bank are having the last laugh, given the ambiguity we had around the the ECB’s QE. The gains which the DAX index has printed are extremely healthy and in order to get this sturdy number we have to go back all the way to 1999.
Moreover, in this quarter we have also experienced a completely different affair which we have not seen in a very long time. A vast majority of central banks around the globe have cut the interest rate and this confirms a global effort to push the global growth higher and a firm commitment from the policy makers to do whatever it takes to make their economies strong.
Disclosure and Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam