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Table of Contents
1. Mass Market Sentiment Survey .................................................... 2
2. Review of Global Stock Markets.................................................... 3
3. US Market Outlook ........................................................................ 7
3.1 US President & Government .................................................... 7
3.2 Effect of QE ............................................................................... 7
3.3 US Interest Rate Hike ................................................................ 8
3.4 US Job Market .......................................................................... 9
3.5 US Property Market ................................................................ 10
3.6 US Bond Market...................................................................... 11
3.7 US Dollar vs Commodity (Gold / Silver / Crude Oil) ................ 12
4. Regional Market Outlook ............................................................ 14
4.1 Europe Market ....................................................................... 14
4.2 China Market ......................................................................... 15
4.3 Hong Kong Market ................................................................. 16
5. Singapore Market Outlook .......................................................... 16
5.1 Singapore Stock Market .......................................................... 16
5.2 Singapore Property Market ................................................... 18
6. Conclusions and Recommendations ........................................... 18
Appendix........................................................................................... 19
Free Investment Courses by Dr Tee.................................................. 20
61% Optimism
3. US Market Outlook
US is the world No. 1 economy, contributing to about 40% of
world stock index, therefore its market outlook should be the top
concern. US stock market was at new historical high in Aug 2016.
Since the end of subprime crisis in year 2009, US stock market
performed much better than its actual economy, mainly due to
several political economy policies (eg. QE1-3 and near-zero
interest rate). As predicted in my last year Market Outlook 2016
report, the bullish stock market may not end easily due to
support of growing US economy. The new US President is likely
to implement more pro-economy policies until the stock market
bubble is burst one day due to uncontrollable market greediness.
3.1 US President & Government
Political economy is a strong consideration, especially for the
controversial new US President, Donald Trump. Due to
uncertainty in political moves, it could be a bumpy year for stock
market in 2017. The global major economies have to establish a
new relationship and power balance with US for the next few
years. When US stock market is at high optimism, any negative
surprised move could become the next black swan event. In
addition, the Republican Party has also taken control of the
Congress (both the Senate & the House), future US government
can be more decisive in major political and economic moves.
The debt level of US government is getting higher each year
which will be a time bomb in far future. Whole world still
believes in the No 1 economy and US dollar, therefore the high
debt is still sustainable, despite massive QE in the past. Europe
has paid a significant price in the last few rounds of debt crisis.
If the same lack of confidence happen in US one day, it will be a
disaster.
7
3.2 Effect of QE
As predicted in my earlier reports, US stock market has
adjusted well without QE3. The Federal Reserve needs to play
the mind game with the market, stopping the massive stimulus
plan at the right time with the help of stronger US economy.
However, larger scale of QE is needed for future global financial
crisis solution. In year 2017, similar episode will be replayed,
except the actor of QE is replaced by US interest rate hike.
3.3 US Interest Rate Hike
Following the natural market cycle, the Fed and global bank
interest rates should be increased before reaching the peak of
economy or bull market. Then, during the next phase of bearish
market, the policy makers will have the bullets to cut the interest
rates to stimulate their economy again, like what they did in the
last global financial crisis in 2008-2009.
Similar to inflation (due to higher liquidity in the market),
moderate and gradual increase in interest rate is a good problem
to have during the bull market. The negative impact of higher
borrowing cost to the corporates can be compensated by higher
earning at the same time.
Historical data of the last 2 market cycles (see Figure 5) show
that the interest rate hikes (years 1994 and 2004 respectively)
actually did not end the bullish stock markets, contrary to some
public opinions based on intuitive. Instead, earlier stock market
has a few more years to grow after US interest rate hike before
reaching its peak. The one million dollar question now is whether
the history will repeat itself in the current market cycle when the
Fed increases the near-zero interest rate, is the current US stock
market considered overheated?
8
2017
Figure 5. Correlation of interest rate and stock index
3.4 US Job Market
The Fed must have a few new pillars when the walking sticks
of QE and low interest rate are discarded. US job market and
property market will be excellent sources of new funds, ensuring
the liquidity in the investment market is not affected.
US is predominantly a consumer-driven market with consumer
spending contributing to about 70% of its economy. US personal
9
Bear Market
2009
1975
-1%/yr
1992
2003
2015
2016
2017
2007
2000
Bull Market
Commodity Market
Global commodity market (Commodity Price Index) usually
has positive correlation to the trend of inflation (Consumer Price
Index), higher during the bullish economy, lower during the
bearish economy, due to the relative demand and supply.
Commodity market has far exceeded the 100% Optimism in the
last economy peak of 2007 but the global financial crisis in 20082009 has seriously corrected the prices, trading at very low
Optimism in the last 1 year based on the trend of last 2 decades,
currently at recovery phase, bullish in short term.
Commodity market is only suitable for short term trading or
long term investing because its trend for the mid-term is still
bearish due to slowdown in global economy, resulting in weaker
demand.
The commodity market correction has created opportunity for
investing in stocks. The prices of commodity stocks are mostly
at very low optimism. However, this opportunity is not aligned
with the global stock markets at moderate high optimism,
therefore the commodity stocks may need longer time for
recovery. Strengthening of USD will add further pressure to the
commodity market.
Gold / Silver
Within the commodity market, the precious metal, gold, has
been a favorite investment of choice. However, in the past few
years, gold has been used as a tool for speculation, not really a
hedge against inflation (which has been at low level for US) as its
last historical peak in year 1980. The price and trend of silver
follows gold very closely.
13
Acknowledgements
The author is grateful to educational partners: Wealth Directions,
Cyberquote, CIMB Securities, Lim & Tan Securities, Phillip Securities,
City Index, UOB Kay Hian, CMC Markets, Shareinvestor.com, SIAS,
Share Investment Magazine, Ein55 graduate and mentors, blog readers and
workshop audience for supporting the Ein55 investing education programs
to guide the general public towards the right path of investment.
Disclaimer
All financial instruments including equity and derivative investment involve risk.
Transacting in financial instruments is inherently risky and uncertain. Past results are
not indicative of future perform. No system or methodology has ever been developed
that can guarantee profits or ensure freedom from losses. The author, SMARTS
Enterprise LLP, Ein55 Pte Ltd and partners shall not be liable to the reader or participant
for any damages, claims, expenses or losses of any kind (whether direct or indirect)
suffered by the reader or participant arising from or in connection with the information
obtained from the publications, newsletters, blog, forum, courses or trainers.
Purchasing
Order (PMI)
Shipping
(BDI)
Market
News
Job Market
(% Unemployment)
Gold / Silver /
Oil ($)
Consumer Market
(CPI / Inflation)
Commodity Mkt
(Comm. Index)
Bank Loan
(% Interest)
Business
(EPS)
USD / Forex
(Dollar Index)
QE
($)
Bond Market
(% Yield)
WE
Stock Mkt
(Index / $)
Property
Mkt (HPI)
Global Economy
(GDP %)
Local Economy
(GDP %)
20
Local Gov
Policies
SG
US
2017
HK
CN
21