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With the Trump-Kim summit now underway, investors are already looking elsewhere for market clues.
The most important one is the Fed monetary decision tomorrow (Wednesday). Investors are generally anticipating a small hike of 25bps to 2%. While this is by no means a large move, markets are expecting more rate hikes later this year. So the cumulative impact of the tightening will be an ongoing rise in borrowing costs.
Monetary tightening by the Fed is leading to new market trends: (a) A consistent outflow of US gov bonds, leading to a sharp rise in yields. (b) A rise in USD. (c) A deterioration of many EM currencies (e.g. Turkish Lira, Brazilian Real, Argentina Peso).
In the stock market, however, optimism continues to outweigh negative sentiment. The S&P 500 Index, for example, is still havering near its multi-month highs after a bullish breakout last week. The bulls are obviously aiming for the 2,800 resistance level. Depending on what the Fed says tomorrow, a break above this ceiling is not to be ruled out this week.
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Jackson has over 10 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.