American markets today, Monday, viewed several hours before opening at 9:30 a.m. EST appear poised for a strong start with all major indices in the green. The S&P 500 is sliding slightly at time of writing but should stay positive for the day.
Canadian markets are closed today for the Victoria Holiday.
European markets are open at time of writing and all indicators there are strongly positive.
Amongst precious metals, the safe havens of gold and silver are up.
Amongst currencies, the Euro and Canadian dollar are up against the American dollar while the British pound sterling is unchanged at time of writing. To a point, the strength of the pound depends on the weakness of other currencies according to Jeremy Thomson-Cook, Chief Economist at London-based payments specialist Equals Money.
The role of the American greenback has several question marks hanging over it. “Despite crypto markets imploding last week, the relative increase in volatility elsewhere was slight and the US$ has not been called on to be a haven currency from market ructions yet,” he says, adding that some investors will sell their greenbacks and look elsewhere, possibly in emerging markets.” We expect that trend to continue this week given the lack of juicy US data set for release.”
Very likely the crypto currency saga – imploding or otherwise -- will continue this week. On Saturday, Tesla chieftain Elon Musk, whose pronouncements have led to wild swings in Bitcoin, Dogecoin and crypto currencies in general suggested that in a battle between fiat currencies and crypto currencies, he would support the crypto category. (A fiat currency is issued by a government and not backed by any underpinning commodity such as gold or silver. Its value rests on the stability of the government issuing it and the relationship between supply and demand.) The American dollar, Canadian dollar, British pound sterling and Euro are fiat currencies.
The fallout from Musk’s recent statements about crypto currencies proves again their volatility, certainly, but also points to the volatility of the entire investment environment.
Musk’s statements have another dimension. His recent appearance on late-night comedy show Saturday Night Live may in retrospect be seen as marking the peak in the long running bull market that began in March 2009, suggests Gavin Graham, London-based financial analyst and media commentator.
Graham parallels Musk’s famous ‘hustle’ remark (referring to Dogecoin) with other occasions in which a remark by a well-known financial chieftain portended a major event.
“Events such as an economist forecasting that stocks had reached a permanently high plateau in September 1929 just ahead of the Wall Street Crash or Citigroup CEO Chuck Prince saying in late 2007 in respect to concerns about markets looking overvalued ‘As long as the music is playing you have to get up and dance…’ just before the subprime mortgage crisis exploded, are now seen as signalling a dangerous level of complacency,” he says.
And the impact of the crypto swings doesn’t stop at the coins. Coinbase Global Inc., an exchange for crypto currencies closed on Friday at $224.35, down $9.05 on the day and well down from its high at $429. 54 and its IPO price of $381.
The implications go even further. They may deter at least some mutual and pension fund managers from joining the fray. The wild price fluctuations also mean that they can’t be used as a viable currency since their value fluctuates. For exactly the same reason, their place in an investor’s portfolio changes with the swings.
Longer range, whether Musk’s famous remarks take a place in history alongside the unfortunate economist and the very mistaken Chuck Prince remains to be seen but a quick scan of some technology favourites is food for thought, Graham says.
“E-commerce play Shopify and almost all of the FAANG+ stocks (are) lower for the year to date,” he says. “Tesla itself is down almost 11%, Uber (is down) 10% and Netflix 9.3%, while Apple is off 4.4% and Amazon 2%, despite delivering very strong earnings for the most recent quarter,” he says,
Several reports scheduled for this week will telegraph different aspects of the pandemic. On Thursday, Dollar General Corp., and Dollar Tree Inc. report first-quarter results while Costco Wholesale Corp. posts third quarter results. Analysts will be looking for the impact of stimulus checks and the easing of COVID 19 restrictions. Also on Thursday, Dell Technologies Inc. reports first quarter revenue and analysts may look for the impact of increased sales of computer equipment generated by the trend to working from home.
Several events look set to add to market volatility this week and for weeks to come.
The U. S. Case-Shiller Home Price Index, scheduled for release tomorrow and consumer spending data scheduled for release on Friday will telegraph the health of those two sectors.
United States President Joe Biden unveils his 2022 budget on Friday with a proposed $769 billion in non-defense discretionary funding and $753 billion for national defense programs. Investors in Boeing, Raytheon, Lockheed Martin and other defense stocks will be looking for clues.
County Superior Court in Boston will hear a bid by Robinhood Markets Inc. to block state regulators in Massachusetts from enforcing a new rule that the online brokerage encourages inexperienced investors to place risky trades without limits. Massachusetts authorities have wanted to revoke Robinhood's broker-dealer license for several months. Not surprisingly, given its corporate persona, the company portrays the court battle as ‘us against the elitist office’ of Secretary of the Commonwealth William Galvin. The stakes are high for Robinhood as it plans to launch an IPO later this year.
Disclosure: I do not own any shares in any company mentioned in this article and do not own any crypto currencies. Al Emid is a financial journalist broadcaster and author. His next book, The 2021 Emid Report on Volatility is scheduled for a Fall release.