Spooky Sell Signal
The crisis generated by the pandemic outbreak damaged most sectors of the economy. Amid weak macroeconomic figures, stock markets reached their highest point in history. What will happen when the economy starts to recover? Will the stock market climb sharply towards new peaks? Will central banks increase interest rates? Is there a limit?
We believe that there are no limits. There are no upper limits for a future rally in 2021, and there are no lower limits since most investors are already aware of negative prices. Nevertheless, the question of limits requires to redefine the options pricing models. Two aspects need to be considered. On the one hand, the concept of “risk-free rate” needs to be revisited. Borrowing and placing monies with no risk makes no sense because the money market offers not time value.
Therefore, the concept of risk neutrality is obsolete in the current environment. Pricing under historical probability would provide more realistic valuations.
On the other hand, options pricing theory assumes that assets values are strictly positive. Except for some recent developments in interest rates, all models do not include the scenario of a negative asset value. Therefore, most equity options are at least in theory under-priced. It is maybe the time to observe more retail activity in the derivatives markets.
If the sky was the limit, none of our heroes would have reached the moon. Matshona Dhliwayo, Canadian philosopher
Non-farming payrolls increased in November by 245,000 well below the October figures and analysts’ expectations. The acceleration of the pandemic spread in the US amid the cold season fuels fears of a stricter lockdown after the New Year when the elect president will be officially in the office.
Thus, employers are not so keen to hire fearing a new slowdown of the economy in the first quarter of the next year. And yet, nothing can stop the stock market in its triumphant march. The recent announcements concerning the early approval of the COVID vaccine brought a new wave of optimism and bolstered the market indices.
Mass vaccination is on the agenda of most developed countries for 2021. Moderna and Pfizer share the pole position in the race to take over this new market. Many investors made a lot of money on Moderna, and they are curious to know if there is any place left to extract more profit. The real issue of all these vaccines concerns their efficacity and the duration of their immunity. The better solution will have a bigger market share.
Moderna brought evidence that its vaccine confers immunity three months
after injection. It is, without doubt, a positive signal that bolsters the
stock this week. If the FDA issues an emergency approval of the Moderna
vaccine, we could observe a real bubble by the second quarter of next
year.
Since May, all markets go North except the US dollar, which is continually
losing ground compared to the Euro. Seemingly, Biden’s victory did not bring
the expected support to the American currency. There is a slow trend of
de-dollarization across international markets, as many governments from the
emerging countries are selling part of their dollar reserves. Gold prices
did not recover as expected, thereby implying that institutional investors
redirect their funds towards other currencies, including the Swiss Franc and
the Euro. If the United Kingdom manages to seal the Brexit deal, we
could witness a strong rally of the British pound. But a weak dollar may not
be a positive thing for the economic recovery. Most international trade
contracts are negotiated in dollars, and the current trend may hinder the
growth and lead to an increase in consumer prices for imported goods and
services.
Kandi Technologies Group is another example of a NASDAQ listed company that surfed the bubble created by the electric car revolution triggered by TESLA. Hindenburg Research issued a negative report about the firm headquartered in China underlining several irregularities in their accounting and business practices. Kandi’s share price dipped by more than 40% last week after reaching a maximum in the second half of November. This move came amid a global bullish trend on the stock market. Investors became suspicious and shorted the stock, Kandi sharing the same fate as Nikola, another company that aimed to get onboard on the electric car rally.
The United Kingdom has approved the Pfizer–BioNTech vaccine after passing the safety and efficacy tests. The COVID vaccine is not only a solution to the current global crisis. It is a game-changer in modern medicine. The Pfizer–BioNTech vaccine is the first mRNA vaccine in history. Such vaccines allow in theory inserting or re-writing parts of human DNA, thereby opening the gates to the development of transformative medicine. The rally on Moderna’s shares impacted the gene-editing biotech companies positively. CRISPR Therapeutics is a leading company in this field, developing a proprietary CRISPR/Cas9 gene-editing platform, allowing for precise, directed changes to genomic DNA.
The Dow Jones continued its rally and reached 30,200 USD. The market applauds the forthcoming COVID vaccines and the foreseeable stimulus package.
Bitcoin is still in a bullish mode and ended the week at 18,200 after
flirting with 19,500. Crypto-currency investors encompass a significant
number of speculators aiming to make a profit in the short term. There is a
mass of Bitcoin believers that will bring support in the long run, and for
this reason, we still see the potential for Bitcoin to expand. Thus, Bitcoin
is becoming slowly but surely a leading asset in the investment, and we
expect to see Bitcoin rising towards 20,000 in the early days of 2021.
General Disclaimer
The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.
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Spooky Sell Signal
Gold Shines at New Highs
The ECB Cuts Again
Slowing Disinflation
Golden-Week Rush
China’s Massive Package
The Fed’s Big Rate Cut
The ECB Cuts Again
Banks Turn Bearish On China
Million-Dollar Gold Bar
Bonds Are Back
Black Monday
Diverging Rate Decisions
Still Strong
Smaller Is Better
The Name Is Bond, Green Bond
Landslide Victory
AI-Frenzy Takes a Break
Bye Apple, Hello Nvidia
The Fed Stays Put
An Indian Rollercoaster
The Name’s Bond, Convertible Bond
Nvidia Does It Again
A Small Relief
From Boom To Bust
Higher For Longer
Still Magnificent
Halve And Havoc
Stubborn Inflation
Choc Shock
An End Of An Era
Britain Bounces Back
China's Goal
Bye iCar, Hello iAI
Nvidia Beats Expectations
Germany Overtakes Japan
Riding The Dragon
China’s Falling Behind
India Outshines Hong Kong
Aging Dragon
US Inflation’s Accelerating
Tesla Lost Its Crown
2023 Market Wrap-Up
The Last Samurai
Fed Teases 2024 Rate Cuts
Bond Market's License to Thrill
Cyber Week Bonanza
OpenAI's Leadership Shuffle Drama
Inflation’s Cooling In The US And UK
Back Into Deflation
Triple Hold On Rate Hikes
The US Economy Is Still Flexing Its Muscles
Inflation’s Refusing To Come Down
Investors Are Bracing For A Dip
An End In Sight
Rate Hike Recess
End Of An Era
China's #1 Ambitions Are Fading
Americans’ Piggy Banks Are Running Low
Trying To Break The (Wage-Price) Spiral
China: A Nation In Deflation
Uncle Sam Gets Downgraded
Twin Hikes
Stagnating Dragon
A Tale Of Three Inflation Stories
Silver Is Shining Bright
UK Inflation: Defying Gravity
The Fed Calls A Timeout
A One-Two Punch
Shrinking Dragon
Keep Calm And Carry On
The AI-ffect Of The AI Mania
SLOOS: Crunch Time Looms
Last Republic
LVMH Pops The Bubbly
India Takes The Population Throne
The End Is Nigh
OPEC Drops the Pump
Why Gold Is Glittering
Can't Stop Won't Stop
To Hike Or Not To Hike
China’s An Underachiever
Cash Is King
What Energy Crisis?
The Name’s Bond, Japanese Bond
The AI War Has Begun
Hikes Everywhere
What Recession?
Shrinking Population
Grab Your Box And Leave
A Gloomy Prediction
It's Darkest Before The Dawn
Elon Fires Himself…
Triple Whammy
No More Zero-Covid?
Eight Billion And Counting
Another One Bites The Dust
No Santa Pause
Big Tech, Big Disappointment
The Lettuce Won
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