Chinese Stocks Soar. Gold, Oil, and Commodities Surge Amid Geopolitical Tensions

MOTIVATION
QUOTE OF THE WEEK

"The only limit to our realization of tomorrow is our doubts of today."
— Franklin D. Roosevelt
This quote reminds us that our future is built on the foundation of the belief we have in ourselves today. It's a message of hope and action for those looking to create a better tomorrow.

WEEK 30/09/2024 to 04/10/2024
🚨What you need to know this week🚨

• Chinese stocks surge on stimulus package: Chinese equities have jumped over 20%, with the CSI300 gaining a massive 28% in just two weeks, driven by government stimulus.

• Inflation drops to 2.2% in August: The lowest level since February 2021, easing fears of long-term price pressure.

• Gold ETFs up more than 30% YTD: Gold has benefited from record highs, boosted by a weaker dollar and supply limitations in silver, which is also seeing price increases.

• Copper crosses $10,000 per ton: For the first time in three months, copper has surged above $10,000 per ton, highlighting the strength of the commodities market.

• Utilities and real estate benefit from rate cuts: As anticipated in previous newsletters, these sectors are positioning as winners in the current rate-cut environment.

• Trade tariffs and taxes could delay GDP: The combination of Trump’s high tariffs and Kamala’s proposed high corporate taxes could slow economic growth and bring inflation back.

• Powell signals more rate cuts ahead: Two more 0.25% cuts are expected this year, while further 0.5% cuts seem unlikely.

• Potential impact of dockworkers' strike: If the strike drags on, consider doing your holiday shopping early. A prolonged strike could dent U.S. GDP and push inflation higher.

• Strike ends with 60% wage increase over six years: The deal was struck after lengthy negotiations, averting further economic disruption.

• Oil prices surge amid geopolitical tensions: Rebel attacks in the Red Sea and rising tensions between Iran and Israel are pushing oil prices higher. The region accounts for one-third of the global oil supply.

• Strong labor report: September saw 254,000 new jobs added, exceeding expectations of 150,000. Unemployment fell to 4.1%, which could influence future rate cuts.

• Middle-class wages haven't kept pace with productivity: According to the Economic Policy Institute, productivity rose 80% from 1979 to 2024, while wages for the middle class increased just 29.4%.

• EU imposes 45% tariffs on Chinese EVs: The European Union has introduced tariffs of up to 45% on electric vehicles (EVs) from China, which will be in place for the next five years.

04/10/2024
🔎 Insights on the market 🔎

This week was quite interesting, with momentum in commodities and Chinese stocks. Then, with a strong labor report, it ended up being a bullish week after some uncertainty in the first few days.

Now, more 25bp rate cuts are expected before the end of the year, and we have SPY near its highs, with what appears to be a cup and handle pattern as shown in the chart below. If this pattern confirms, the price dip we saw this week could have been an excellent buying opportunity for those who took advantage of it. Personally, I’m in about five assets that are already giving me a good return, including a couple of oil companies to capitalize on the rise in oil from its lows, and others like AMZN and OMF, which were in an interesting buying zone.

Let’s see how the market unfolds next week. For now, the candle left behind looks promising.

📜 Historical Perspective 📜

• Commodities surge: The last time copper passed $10,000 per ton was back in 2011, during a similar global recovery phase. Commodities, particularly gold, are often seen as inflation hedges, which is critical during uncertain economic times.

• Strikes and inflation: The dockworkers' strike, if prolonged, could lead to supply chain issues similar to those seen during the 2021 pandemic, when inflation surged as goods became harder to come by.

28/09/2024
✍️Market Lessons ✍️

This week teaches that geopolitical tensions and labor movements remain powerful forces that can influence global markets and commodity prices. Keeping a close eye on these factors, alongside rate cut signals from the Fed, is key to navigating the near future.

💸 Common Mistakes 💸

Overlooking the impact of trade tariffs and labor strikes on GDP and inflation can be costly. Investors who ignore the economic ripple effects of these events may miss key market signals, especially in the commodities and manufacturing sectors

📅Next Week’s Economic Calendar (07/10 to 11/10):📅

Monday, October 7, 2024

Tuesday, October 8, 2024

Wednesday, October 9, 2024

Thursday, October 10, 2024

Friday, October 11, 2024

📅EARNINGS CALENDAR (08/10-11/10/2024)📅

Tuesday, October 8, 2024

Thursday, October 10, 2024

Friday, October 11, 2024