Tags: market | volatility | 2019

Market Volatility Will Be 2019's Main Driving Force

Market Volatility Will Be 2019's Main Driving Force

Friday, 28 December 2018 09:41 AM Current | Bio | Archive

While the year 2018 nears an end in a flash of volatility, one thing is for sure: the markets are ending the year with a lot of noise in a very tumultuous environment, politically as well as financially.

Uncertainty, and because of that, volatility could become a dominating force in 2019.

Besides all that, here are five of the most important events in 2019:

  1. How the U.S. – China trade disputes evolve, which in my view can’t be resolved quickly.
  2. How the historical Brexit will turn out March 29, and the world-wide consequences it will trigger.
  3. Where will the price of oil could be headed for, now that several major global banks have upgraded their estimates for the price of Brent crude oil could go back to $70 per barrel?
  4. How will the geopolitical situation in the Middle East evolve?
  5. And so on … and so on.

Anyway, I certainly don’t expect a recession in the United States and even in most of the rest of world.

To have an idea what 2020 could bring us, I think it’s still too early to have a serious estimate.

For now, the U.S. partial government shutdown over the border wall is likely to continue into the start of the New Year, which will in fact not surprise many market observers. 

After the spectacular collapse we have witnessed during the last couple of days and then the impressive upwards correction, I do not think this forebodes a quick return to the overall relatively “quite” environments markets’ investors have known thanks to the quantitative easing period that the major central banks of the world have put at work since the recession of 10 years ago, the San Francisco Federal Reserve Bank has noted.

For now, of the major central banks that provide the major world reserve currencies for the International Monetary Fund (IMF), which are the U.S. dollar, the Euro, the British pound, the Japanese yen, the Swiss franc, the Canadian dollar and the Chinese yuan, only the Federal Reserve, and now Canada since October 26, are “tightening”.

By the way, the dollar’s share of the IMF’s currency reserves represent about 62 percent, the euro’s about 20 percent and the Chinese yuan’s about 1.36 percent, Reuters said.

As an investor, I would take that into account, not that I think that the Eurozone that has the second most important reserve currency in the world, before Japan, which is at risk of being obliged under "Abenomics“ never to tighten again (That's called political interference!), the few tightening undertakings could raise the value of their respective currencies.

I personally don’t expect the Chinese yuan to raise in value now that the Chines economy is confirmed to be in a downturn, as the New York Times explained.

I would like to add that many analysts say a softening of the dollar is on the cards for this year, especially during the second half. Until now, I’m not so sure of that notwithstanding that everything what goes up, must come down.

Will President Trump Meet Fed Chair Powell?

In the meantime, the Wall Street reported: “White House officials say they are working to orchestrate a meeting with the president and believe the Fed chairman is open to the idea.”

Kevin Hassett, chairman of the Council of Economic Advisers, is the latest, said in an interview he gave on Wednesday that Mr. Powell, who goes by Jay, is secure in his job. “The president has voiced policy differences with Jay Powell, but Jay Powell’s job is 100% safe. The president has no intention of firing Jay Powell,” Mr. Hassett told The Wall Street Journal.

President Trump’s tweet he sent on the day before Christmas: “The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch - he can’t putt!” could need some “sound” talk between the President and the Fed Chair who, of course, can differ in opinion while keeping in mind that the Federal Reserve is an independent. In case the meeting happens we’ll see “what” comes out in the “open”.

No doubt, this is a serious case.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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I certainly don’t expect a recession in the United States and even in most of the rest of world.
market, volatility, 2019
Friday, 28 December 2018 09:41 AM
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