Watching the DAX and S&P 500 with signs of breaking down
The increase in geopolitical risk coincides with the messaging from central banks, most notably the Federal Reserve, that rates could stay high for longer. This is impacting the outlook.
IGTV’s Jeremy Naylor caught up with Serge Berger from TheSteadyTrader.com who looks at the potential downside risk. He also addresses the potential in both oil and gold.
(Video summary)
Gold, oil, and stocks: unpredictable market trends
In this video, Serge Berger from TheSteadyTrader.com talks about what's currently happening in the markets, with a focus on gold, oil, and stocks.
He explains that there are two different factors affecting the markets right now: the overall economic trend and the end-of-year tailwinds. The economy is slowing down and facing challenges due to higher interest rates, but at the same time, there's a seasonal strength in the markets because funds are anxious about not performing well.
Berger believes that because of these factors, the markets will likely be unpredictable, and if there's any negative economic news, it could cause stocks to go down and bond yields to drop, which would also affect other assets like oil and gold.
Speaking of gold, Berger mentions that it has been affected by rising real interest rates. As interest rates have gone up and inflation data has come in, gold has experienced a significant decline in its value. However, Berger thinks that as economic data starts to cool down, which is likely to happen in the fourth quarter, gold could make a comeback as real interest rates decrease.
In terms of oil, Berger talks about three main factors that influence its price: disruptions in supply because of geopolitical tensions, decreased demand due to the slow economy, and the value of the US dollar. If the dollar weakens due to declining interest rates, oil could become more valuable. Berger predicts that the price of oil will stay within the range of $80 to $95 on Brent crude.
S&P 500, DAX
Berger also expresses concerns about the long-term future of the stock markets. He believes there might be an opportunity for investors to short sell, especially if the S&P 500 index goes below 4,200 points. He also mentions the DAX index in Europe as something to keep an eye on, given the economic challenges in Germany and the resistance it's facing on its chart.
When it comes to tech stocks, Berger warns of potential risks as the overall stock market declines. However, he points out that Meta (formerly known as Facebook) has been performing well recently and suggests considering it for long positions, especially because its upcoming earnings report could have a positive impact on its stock price.
Overall, Berger expects the markets to be unpredictable and advises keeping an eye on economic data and important levels like 4,200 on the S&P 500 and 15,600 on the DAX to understand which direction the market is heading.
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