Market on tenterhooks awaiting the outcome of the trade talks and optimism for a positive outcome took its toll on gold stocks (more so than gold). At the end of it, XGD lost 1.23% while XJO gained 0.91%. Goldwatch stocks were impaired on the junior gold stocks taking a hit, possibly on adverse sentiment over SPX.
The market has always been so narrowly focused on the immediate events (now on outcome of trade negotiations) but mainstream financial media e.g CNBC would never focus on underlying issues (such as debt situation) facing the global economy- the reality is that we can ill afford to have a global recession as the ramification would be large. As Karen Ward, JP Morgan Asset Management chief European market strategist described that the focus should not be on when a recession will happen but how deep it would be.
The $64 million dollar question obviously is the time it takes to get there, and the longer and more protracted this US-China trade war goes, the sooner we would reach the destination. That said, past recessions have shown to actually occur way before the data proved two consecutive quarters of contraction, and the markets tend to digest and adjust itself relative to the probability of it occurring before its confirmation.
The Fed is a little bit like our market authorities. Unbridled capitalism has allowed all forms of debts and instruments to be left unchecked and grown to mind blowing proportions as financial shenanigans thrive and the Fed is unlikely to have any idea how to manage those risks before they implode. Equally , we see a lack of proactiveness in our local market authorities to establish a proper framework for standardised reporting and disclosure at the small-microcap end of the market but instead react when an issue has surfaced.
Unbridled capitalism which benefited the 1% of society will soon have its day of reckoning, we just need to ensure we do not fall victims when the day arrives.
