Markets See Green and Gold: Look for Fed Cut Flag to be Waved at Jackson Hole, Marking a Hole in One for Markets
US and Australian share markets have more than recovered from the panic sell-off two weeks ago, which caused markets to lose four and a half months of gains in a matter of days due to concerns about the Japanese-carry trade unwinding and US recession fears.
But investors quickly bought the dip. With markets being forward-looking and focused on the future, we have potential rate-cut flags coming (the Fed's Jerome Powell is expected to wave that flag at this week's Jackson Hole address). Plus, we have better-than-expected company earnings results, and the global economy is performing better than expected too. So, it's a good mix for markets to keep moving higher over the long term and to get back to those record all-time highs in July.
It's also vital to reflect on what happened two weeks ago with the fear gauge (the volatility index, VIX) seeing its third-biggest jump in history (rising from 14 to 65; it's now back at 15). But market fear had only ever been at 65 two other times: the GFC in 2008 (hitting 89) and during the pandemic (hitting 85).
So, what can we learn from this? Knowing that markets have always recovered from a crisis, such as the pullbacks during COVID and the GFC, and the pullbacks over the last 12 months.
Well, we know fortune favors the brave. Shelby Davis said it well: “You make most of your money in a bear market. You just don't know it at the time.” The chart below shows what would happen if you acted like an investment manager, buying when fear was high and selling once the market rebounded.
If you bought the world's biggest ETF, the SPY $SPDR S&P 500 ETF (SPY.US)$ , when the VIX $CBOE Volatility S&P 500 Index (.VIX.US)$ rose over 20 and the market pulled back, and if you sold after the VIX fell back to 12, which is when markets recovered, you would have made 38%. That's if you bought into the pullback in October last year and bought after the pullback in April this year.
This shows you don't even have to be a stock picker. You just have to take the approach of buying low and selling high, simply by looking at the VIX and buying the most popular ETF in the world—the SPY.
Moving to weekly performance of last week, we've seen monumental gains being made not only where investors are buying the dip into stocks like Starbucks $Starbucks (SBUX.US)$, SMCI $Super Micro Computer (SMCI.US)$, and Nvidia $NVIDIA (NVDA.US)$ , but also from companies reporting better-than-expected earnings results. Look at ASX-listed packaging business Orora ( $Orora Ltd (ORA.AU)$ ), rising 32% last week and outperforming US chip companies. The glass bottle and aluminum can company saw its earnings rise 75% more than the average analyst expected. Orora was then upgraded by Goldman Sachs, UBS, and Morgan Stanley.
While looking at year to date, we can learn a lot. We need to remember that the market is forward-looking.
So we can see where the market thinks the most forward earnings growth is going to come from, and that's where we are seeing the biggest returns. It's in a couple of key areas:
AI and Chip Thematic:You have hardware companies like Nvidia and SMCI up 120-150% this year, and uranium companies like Constellation Energy and NRG benefiting from data center demand for cheaper and carbon-free energy.
Future Rate Cut Beneficiaries :Stocks like Zip $Zip Co Ltd (ZIP.AU)$ (+244%) and Life360 $Life360 Inc (360.AU)$ (+138%) are benefiting from the strong consumer, retail spending, higher wages, and the wealth effect, all of which are boosting their earnings growth and driving share price growth.
Gold Companies: Gold stocks are hitting new highs, and that will probably continue for several reasons. Stocks like West African Resources $West African Resources Ltd (WAF.AU)$, Ramelius Resources $Ramelius Resources Ltd (RMS.AU)$, and Newmont $Newmont Corp (NEM.AU)$ are worth watching. I think the market could soon be talking about gold heading to US$4,000 in the not-too-distant future. It might seem hard to believe, but I've previously written about why this could happen. Refer to my moomoo column for more
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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151453268 witso : Yep nice, back in the green again sailing north with fair winds, some stragglers but they will see their day in the sun, great market round up Jess some other potential stocks to take on board or cut loose to steady the
. Otherwise weather fine and sunny 
Jennifer-Lashley : I've been taught, thanks for sharing!![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
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Stoobs : Yes, what an amazing rebound. Surley bots were driving such volatility? Holding and buying dips with 360![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")