Straight-shooter Jessica Amir is a Market Strategist at Saxo Markets. Jessica joined Saxo a year or so back and brought along  well over a decade of global financial market wisdom.

She focuses on providing strategies, straight-shooting, investment ideas; sharing insights in a relatable straight-shooting way, minus the financial jargon.

Here, she gives Stockhead exactly Two Minutes of Wisdom.

 

Stockhead: Hi Jessica. It’s The Fed. What’re they doing to markets now?

Jessica: The Federal Reserve made its eight rate hike, increasing its benchmark interest rate by a 0.25% (25bps) as expected.

The market was looking for signals the Fed is at the end of its cycle. And the market received indications the end could be in sight. The Fed statement alluded to hikes slowing, as it said inflation has eased somewhat but remains elevated.

…Later, (Fed Chair Jerome Powell) he said he sees inflation coming down soon. 50% of inflation is ‘disinflationary’ Powell said. And that’s positive. So this suggests policymakers are getting more confident price pressures peaked and are rolling over. When The Fed indicates inflation could come down soon, we’ve been seeing fuel added to the optimism.

 

What are you watching with an eye to MAKING MONEY?

Jessica: First things first. There’s been a positive reaction to Fed and a risk on rally ’till the data proves otherwise.

The S&P500 reversed its fall, gaining 1.1% to close at hit its highest level since August 26. From a technical perspective, a golden cross is forming which could trigger quant trader buying. That’s something to watch, which could trigger more upside.

The Nasdaq recovered from its earlier loss on Wednesday after the Fed Chair spoke, gaining almost 3% from its low of the day, before ending 2% up. The focus is right back on growth and the FAANG family in particular.

 

Let’s talk tech then. Meta kicked off major tech earnings with a bang. Perhaps a happy sign of what we can expect from Apple, Amazon and Google?

Jessica: Facebook surprised with a strong climb after announcing a US$40 billion boost to its share buy back, as it’s guiding for stronger revenue that expected in Q1 this year, seeing revenue hit US$26 to US$28.5 billion, with that bulls eye target being more than expected (at US$27.25 billion). Q4 revenue beat expectations, falling to US$32.2 billion, vs $31.7 billion expected. The business sees outgoing expenses dropping more than expected (to $89-95 billion) and lower capital expenditure.

Also on the positive, Facebook’s daily users improved more than the market expected. From a technical perspective Meta shares closed above their 200-day simple moving average. And again, it also appears, a golden cross is forming which could trigger quant trader buying. Clock that and keep an eye on it for further upside.

 

At home, the Aussie share market – the first to offer a reaction to the Fed, has taken on the lead delivering the risk on rally in our teeny tech sector. The headwinds are going in the right direction for our markets?

Jessica: Risk on assets such as tech stocks are charging, with the sector up 2.8%. A few names like Xero (ASX:XRO) did very well up 7.6% albeit from a low base. But gold equities are being bid too, rising 5-6%, this after the gold price rallied 1%.

Long term investors will be watching the tech index, given it’s down an exciting 30% from its last high. …Also consider the overall market. The ASX200 has a PE at 15.2 times. That’s a good deal cheaper than the Nasdaq Composite’s’s 57 times earnings. And the major US benchmark, The S&P500 has an earnings multiple of over 19 times.

 

What about commodities then, they make up most of what we’re flogging

Jessica: Commods are mixed but you noted that strength picked up immediately after (US Federal Reserve Chair) Jerome Powell’s more dovish tone.

Gold (XAUUSD) is up over one pre cent to US$1949, remembering gold historically outperforms equites when the Fed pauses rate hikes. The last time the Fed paused in 2019 the gold price rallied over 60% to a new high. Up. Side.

The All Ords gold sub-index rose over 4% with majors Evolution (ASX:EVN) and Northern Star (ASX:NST) up there

Westgold Resources (ASX:WGX) was first among equals for the mid cap goldies around a 7% gain. WGX is up almost 50% since New Year.

…at the same time, Copper is down 0.9% but did recover from its earlier selling after the Fed Chair spoke.

…meanwhile weak real estate data in China for January had an impact on our big iron ore producers.

Rio Tinto (ASX:RIO), Mineral Resources (ASX:MIN), Fortescue (ASX:FMG), BHP (ASX:BHP) and Grange Resources (ASX:GRR).

…Crude oil is down 2.6% US$76.84. We argue – as we’ve been highlighting – and as Ole mentioned on our podcast, the fundaments are showing positive signs and oil demand has been rising over the last several weeks. However, most of the selling in oil has been from hedge funds closing positions that they opened over the last few months. We reckon oil prices are underpinned higher.


The US dollar index fell to new cycle low after Powell’s speech. That’ll make some people happy.

Jessica: The DXY is now down 11% from its high. The Aussie dollar against the US (AUDUSD) rallied 1.1% to 0.7136. So that’s a pair we continue to watch and which will also draw the eye of FX traders.

 

All information and material contained herein is general in nature and does not consider your financial situation, investment needs or objectives. The information does not constitute personal financial advice, nor a recommendation or opinion that a security or service is appropriate for you. You should seek independent and professional tax and financial advice before making any decision based on this information.

 

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