Johannesburg, 11 March 2021: It’s trading unexpected. Fred Razak, Chief Trading Strategist from CM Trading, discusses a few interesting indices that global traders can buy right now.
“While there are standard indices like the Nasdaq, the Dow Jones and the Nikkei, which are popularly traded on, there is also a lesser-known index called the Russel 2000. And this is interesting because it is made up of smaller to mid-level-sized companies that are fuelling the market. These companies are more entrepreneurial. It’s quite novel. These are smaller companies that are on the edge of technology – like NVidia and KLAC, for example. These companies are taking advantage of the incentives that the central banks are providing right now and flying high.
“The truth is, the unemployment numbers we’re seeing around the world may be a bit fictitious. The reason for this is that there are so many people who hold transitory kinds of jobs – like waitering or hospitality jobs, for example. And this is part of what is fuelling the market at the moment. It’s not as bad as the press might have us believe. By and large, people are still paying their bills. And the markets are really trading in unison internationally. If you look at most of the indices around the world, they’re close to all-time highs. The Nasdaq is trading within about 600 to 700 points of its all-time highs. And the Dow Jones is within about 200 points of its all-time highs.
“The question is, ‘why?’ It’s quite simple, really. There are a lot of things being tinkered with behind the scenes. We are in the midst of a pandemic and companies are operating on a lower flame. The Fed is allowing companies to borrow money from central government at lower rates. And while this is artificial, it is stabilising the markets. Governments are sustaining the indices so that jobs aren’t lost and economies don’t fall apart.
“In the US, we had a transition from Trump to Biden. And these administrations could not be more different. Due to Biden’s policies, shares in car companies committed to electrical transformation, who are looking at doing away with fossil fuels, have seen incredible growth. Overall, the energy sector has had an incredible boost. And China is investing heavily in hydrogen-powered vehicles. We are making the transition to sustainable energy in a very aggressive way. It’s not just Tesla that is doing well.
“Another really noteworthy point is that gold has been in a very conservative position for the type of environment we are currently in. And while gold is close to its all-time highs, it’s not where I would expect it to be. This is probably because the central governments have been really good at keeping the monetary momentum going in the global economy. And it’s a very delicate situation, because if the stimulus packages are stopped, it may negatively affect the markets.
“Sometimes we forget that, primarily, the economy is fuelled by consumers. The Consumer Confidence Index is an often neglected value. But it is a very important number. Consumer sentiment is a vital factor to consider. It can’t be overlooked. And if you look at the Consumer Confidence Index, there is still a relatively healthy balance. Even though there are parts of the market that are underperforming, others are doing exceptionally well – particularly real estate. Real estate acquisitions, stocks and exchanges are still really high globally, relative to the environment we are in. Interest rates are low, so there is still robust market activity.
“The markets are hurtling through the stratosphere in the pandemic. And we are certainly seeing a lot of activity that might be considered unexpected. The trading environment is more interesting than ever. But there is ongoing momentum in several sectors. I think the next six months to a year will be very telling in terms of where exactly we will end up in space and time.”
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