“Don’t panic and make some crazy, rash decision that veers away from your game plan. The roller-coaster ride back up happens just as quickly, and missing recovery days can crater your portfolio.”? Wise words from Lee Baker, owner of Apex Financial Services in Atlanta, reminding us to stay invested during times of volatility.
These are the mid rates at 6:20 today:
Brent Crude = $77.32 per barrel
- When the market goes into meltdown mode the Rand has nowhere to hide, and yesterday was one of those days.? We opened the week already under pressure at R18.37 to the Dollar and quickly fell to the day’s worst level of R18.67 before pulling back a little to R18.50 by the close.
- “Overreaction” is a word that is doing the rounds when trying to understand just how the global equity rout managed to escalate to dramatic levels so quickly yesterday.? To put it into perspective the Japanese Nikkei Index closed 12.40% down yesterday which is its worst one day performance since 1987, but if you think of everything that has happened in the world between 1987 and yesterday it doesn’t make sense that a combination of the FED not cutting rates, the Bank of Japan raising rates and a softer than expected US jobs report should be the catalyst for the biggest fall in their stock prices in 37 years.? Early indications are that the market has realised its overreaction with the Nikkei already up by 10% today, and hopefully nobody sold at the peak of yesterday’s panic because they would be seriously regretting it today.? ??
- As one analyst on Bloomberg put it yesterday, momentum begets momentum, and what started with a risk-off sentiment on Friday following the US jobs report turned into a stampede for the exit yesterday.? The FED only adjusts interest rates between policy meetings in times of extreme uncertainty and the last time that happened was when COVID was terrifying the market in early 2020, and justifiably so.? To see headlines yesterday that the market is pricing in a 60% chance that the FED will cut rates by 50bps by the end of this week came as quite a shock, and while this smashed the Dollar Index all the way down to 102.25 it also sent the Rand to R18.67 because such an action would signal to the market that the FED are panicking.?
- Fortunately, just when the panic looked set to continue unchecked the market got two events that turned things around, not enough to reverse the losses but stocks closed well off the day’s lows while futures are indicating a positive open later today.? First was a US services PMI report which came in stronger than expected and this is a big deal because their services sector makes up more than two thirds of the economy, and after languishing in contractionary territory for four months July’s reading came in at 51.4 points.? Strength in the services reading went a long way to easing recessionary fears and the market’s panic subsided a little.
- Importantly, we then got two FED members speaking yesterday and both of them were at pains to calm the market’s fears.? Both Mary Daly and Austan Goolsbee said that the US jobs report, while softer than expected, did not signal that the US economy is in a recessionary freefall, and with Goolsbee a known dove when it comes to his policy views the market was heartened that he sees no need for an inter-meeting rate cut.? We’ll no doubt get more FED speakers throughout the week, and hopefully they all remind the market that one jobs report does not fundamentally change the course of the US economy.?
- No local market data today.?
- Possible USD mid rate trading ranges in the Rand today are R18.30 and R18.60
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