No bad macro data can stop the rally of the markets – Market Analysis – April 29

No bad macro data can stop the rally of the markets – Market Analysis – April 29

Despite disappointing consumer confidence data, US stocks rallied strongly

The Federal Reserve has held its monthly meeting and has decided to keep interest rates and its expansionary monetary policies unchanged.

The FED

Expansive fiscal policies that are the most aggressive in history and that include the purchase of treasuries, corporate bonds, and asset-backed securities in amounts never seen before.

The Fed says that the drop in Oil prices and weaker demand ensure that there will be no inflationary tensions in the future and, therefore, that they will maintain this stimulus policy in the medium term and, in any case, as long as necessary. The Fed acknowledges that the virus poses a considerable risk to the economy.

Therefore, the uncertainty will remain as long as we do not know the duration and impact of this pandemic on the economy as a whole.

This Fed statement that shows an economic reality full of shadows contrasts with the behavior of the stock markets that, after the pronounced drop experienced at the beginning of the crisis, have already recovered more than 60% of all losses. Nasdaq100 is trading at the same levels as at the beginning of the year as if no global shutdown ever existed.

The measures taken by the Fed reflect the high degree of concern that this crisis raises. The speed in its action and above all, its magnitude has undoubtedly managed to avoid worse consequences and have managed to keep the credit and financial markets functioning. This performance is one of the main reasons why the stock markets have had this exceptional performance.

Although the opinions in the market are polarized. There is a good part of institutional investors with a less optimistic vision that considers that the recovery will not be as expeditious as the stock markets are currently reflecting and that the impact on consumer capacity, on future earnings of companies, and even on solvency levels will be of greater impact and more lasting than the most optimistic estimate.

But for now, the upbeat side is dominating the market, and indices like the USA500 have traded slightly above the 0.618 Fibonacci retracement of the bearish leg.


Very negative data on US GDP for Q1 has been published with a fall of -4.8% in annual terms, a figure that is very likely to be even worse in the second quarter.

Equities

However, this figure has been ignored by the equities, and almost at the same time that it was published, the progress Gilead Sciences concerning a drug for the treatment of Coronavirus was disclosed. This news has been enough to leave the harmful economic data in the background and cause a significant rebound in the markets to the highest levels of the month. Even Crude Oil has experienced purchases that have raised its price by 10%, same interest applies to BrentOil.


It is evident that the overly optimistic view of the economic recovery prevails in the market, everything will depend on the duration of the pandemic, but that is something that even the president of the Federal Reserve Powell himself admits he does not have data to evaluate.

The ultra-expansive monetary policies will affect the price of the Dollar; there is a greater consensus among market participants on this. The US Dollar has again negotiated slightly downwards, and increasingly positive sentiment towards GOLD as an alternative asset to the loss of value of the currency spreads.

GOLD is in a consolidation phase after the increases experienced in recent weeks. From a technical perspective, it is forming a triangle that can be considered a bullish pattern that would be confirmed with a closing price above $1,740 an ounce.



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