Powell (FED) does not convince the markets

As we do every Sunday, we try to read the past week’s aggregate data of the most important international indexes, with a more specific look at the Italian index (MIB).

What happened this week in the markets?

From Monday to Thursday afternoon, markets lateralized as they waited for statements from FED (American Central Bank) President Powell. After Powell’s words, a descent began and continued on Friday pushed further by various maturities on Three Witches Day.

What did Powell say?

Powell did not deviate much from previous speeches. The FED will continue to help the U.S. economy as long as it is needed, while also keeping rates unchanged near zero.
This time, however, he added that the money being given out will be in the form of loans and therefore will have to be repaid. A phrase that the markets evidently did not like. The Fed has no intention of giving out free money.
At some point, Powell also entered the political topic (we are close to the presidential election), expressing the idea that inequality holds back economic growth.
In the end, he stated that the FED will let inflation run its course and that he is convinced that 4 percent unemployment (pre covid rate) will soon return to the U.S., perhaps as early as next year.

To see how the markets have reacted, it would seem that investors think this figure is unattainable in such a short time.
In short, Powell does not convince the markets because by now to the many promises they are waiting for action. They are waiting for the economy to really recover because of all this money put in by the FED. However, it will take time.

The DAX, which got off to a bad start on Monday, lateralized until Thursday evening and then had a descent in the wake of the U.S. markets and tried to rise again on Friday, but without success.

From the performance of the major international indexes we can see how the week went for the markets in general:

Powell does not convince markets
Source: Webank’s T3

As we can see the NASDAQ is continuing its descent in the now long retracement. Many in Italy these days have felt that the NASDAQ is doing worse than the Italian MIB index, instead the MIB this week lost 1.49 percent. Slightly worse than the NASDAQ, which lost 1.36 percent. Note how CHINA A50, Chinese index went over 2%, a sign perhaps that the Chinese economy will recover first? We were talking about it right here.

What happened this week at MIB?

Let’s take a look at our index. As we said, the MIB lost more than 1 percent, adjusting to international markets. Here are the top 10 companies in the MIBs in terms of weekly performance:

Nameclosing date 09/18/2020closing 11/09/2020Var %
Fiat Chrysler Automobiles10,3789,87475,1
Mediolanum Bank6,746,4574,38
General Bank27,5226,47963,93
Source: borsaitaliana.it

The usual ranking of the performance since the beginning of the year of MIB stocks confirms for us the difficulties of companies listed on the MIB. In fact, only 13 out of 40 companies have a positive performance since the beginning of the year. Of note are DIASORIN and NEXI, which are pulling away from the third-ranked RECORDATI.

Until the U.S. elections, we have some peculiar and difficult weeks ahead in the markets, and good trading will require good knowledge of techniques, cool heads and a lot of patience. If you are not prepared, it is better to refrain to avoid losses later difficult to recover.

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