Welcome to this month's edition of The Gate Market Update, brought to you by The Cornerstone Financial Group Inc. We apologize for the delay in our updates, but we're back with a monthly snapshot of market insights. In this edition, we'll delve into key macroeconomic indicators, technical trends, Federal Reserve decisions and geopolitical developments that influence investment decisions.
Let's start by discussing the current situation in Israel and its potential implications for the American economy and the New York Stock Exchange (NYSE). While Israel itself may not be a major oil producer, it plays a crucial role in the broader geopolitical landscape. The United States has been a longstanding ally of Israel, while Iran and Lebanon have shown support for Hamas. This conflict could potentially escalate, drawing in major global players and leading to severe consequences for the markets. However, it now appears that the conflict is stabilizing, and the consensus is that it won't expand beyond its current region, resulting in a notable market rebound.
It's worth noting that the United States recently showcased the location of a secretive nuclear submarine, underscoring the importance it places on this conflict. Meanwhile, Russia remains in conflict with Ukraine, and China continues to threaten Taiwan. While we're not predicting a world war, it's prudent to remain vigilant as these key global players are increasingly on edge.
Beyond geopolitical events, we must also consider the recent policy decision by the Federal Reserve. On November 1st, the Federal Reserve announced its decision not to raise interest rates this month, reiterating its commitment to controlling inflation and maintaining sustainable employment rates. This stance could lead to prolonged higher-interest rates, which will impact American consumers, particularly in terms of mortgage rates, car loans, and credit card interest rates. As these rates have rises, and given the inflated prices in many sectors, they could place additional financial burdens on the middle and lower-income segments of the population. Furthermore, as money market accounts, CDs, and treasuries offer attractive yields, some investors might move towards safer investment options, potentially causing fluctuations in the stock market, affecting large stock indices.
Now, let's turn to the macroeconomic landscape. While the recent jobless report may have seemed uneventful, it reveals underlying pressures. Continuing jobless claims have been increasing over the past six weeks, suggesting a slow recovery from the job losses in the tech sector and other industries over the past year1. This indicates that businesses may be struggling to expand as desired and are focused on maintaining their current workforce. The markets are forward-looking and rely on predictions of future performance. If companies aren't hiring and expecting growth, this could lead to a market downturn. On the other hand, if the damage has already been absorbed, markets may start anticipating better prospects.
Finally, let's examine the technical analysis of the overall markets. We've seen five downward waves since August, followed by one strong upward wave. Typically, after five downward waves, three upward waves occur, suggesting the possibility of a minor pullback before another uptrend. Additionally, the recent uptick left some gaps around the 200-day moving average (200MA) on the chart, implying a potential pullback to that level.
In summary, considering the geopolitical landscape, the Federal Reserve's decisions, the macroeconomic conditions, and the technical analysis, we recommend that investors exercise caution. If you need more specific details about our strategy or have questions, please don't hesitate to reach out or leave a comment.
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1Durden, T. (2023, November 9). Continuing jobless claims jump to highest since April. ZeroHedge. https://www.zerohedge.com/personal-finance/continuing-jobless-claims-jump-highest-april