Email interview with Chris Weston, Chief Market Strategist, IG
Chris Weston, Chief Market Strategist, IG, will speak to individual traders and investors at 'Market Outlook 2015' seminar on 12 February 2015 where he will "will highlight the key event risks on the 2015 calendar, how to navigate them and what are the best strategies to thrive in these turbulent times."
Chris agreed to help me with this email interview and I encourage readers to make time for this event to listen to him firsthand.
Global Macro Economy
Dear Chris, you will be doing a 2015 market outlook seminar on 12 February. Can you give us an impression of the topics that you will cover?
My central focus will be trying to decipher what a central bank is trying to achieve through the role of monetary policy. Many central banks will directly target a specific asset class, however, there are strong side-effects from even the basic changes which traders and investors can profit from if they understand what is taking place.
I will highlight to traders what is currently in play, so that they can form a directional bias. I will discuss various strategies to help traders survive and thrive in these current market conditions.
My personal belief is that through extremely lose monetary policy, with around 15 central banks having either cut rates, imposed negative deposits or quantitative easing (QE), we should continue to see bond yields staying low, with selected equity markets continuing to see a strong upside through 2015.
There will also be elevated volatility in the FX market as central banks try and out manoeuvre one another. The race to the bottom is taking place before our eyes, so we need to understand who will be the winners and who will be the losers.
I am keen to look at some unconventional trades like long European equities/short S&P 500, or long silver/short gold as well as a pair’s trade.
European and US Equities
I have a note here with me. It says you are bullish European and US equities. Can you tell us why you are bullish European and US equities?
Europe is outperforming the US at present. Global investors have always been concerned about being exposed to markets where the domestic currency is in free-fall, but the fact that the European Central Bank (ECB) are now undertaking QE should direct much of this new liquidity towards the equity market. When bond yields are so low and banks are not lending as much as the ECB would like, where else does the liquidity go?
There is strong relative growth in the US, but with the Federal Reserve likely to raise funds rate this year, we could see markets where the central bank is expanding its balance sheet outperforming.
US Equities and USD
There is some analyst consensus that the US Federal Reserve will raise interest rates in the second half of the year. How will this affect US equities and the USD?
I always suspected that the Dow Jones and S&P 500 are more vulnerable to increased volatility without QE3 to support, but we haven’t seen any major corrections as of yet. The Fed must have a long consultation with markets to make sure traders and investors are comfortable with the Fed lifting rates. With this in mind, the March Federal Open Market Committee (FOMC) meeting will be critical. Of course there could be a point when a stronger USD becomes a bigger issue for markets and we have already heard from corporates, such as Procter and Gamble, that the USD is having a major impact on its business.
My feeling is that we are in the early stages of a multi-year cyclical bull market in the USD. Until we see QE4, we should see EUR/USD trade to parity in 2016, while commodity influenced currencies (such as the AUD, NZD and CAD) will remain on a weakening path. Follow the trend and you should be rewarded over time.
My note here also says you are bearish EURUSD. Over the weekend, Greeks had a general election and elected a new government that point the country in a new direction. Please share with us how this affects your bearish view.
Well it doesn’t help confidence in any way and plays into the bigger picture that politics will play a strong role with influencing sentiment and ultimately volatility in 2015. Spain and the UK are also firmly in the spotlight.
The negotiations between Greece and its creditors are already getting quite painful. As we approach the latter stages of February, the Greek government will be close to running out of cash. EU officials hold all the cards, but we need to remember that the Syriza party won an election by promising to play hardball and partially writing off the debt burden, which in-turn could lead to less austere measures. A failure to live up to expectations could see a huge uprising in Greece.
It could come down to the wire, but ultimately I expect Greece to remain part of the European Monetary Union. In saying that, the reason why I feel EUR/USD has to fall to parity is based on moves in the bond market, as well as increased capital flows to the US from European investors.
There is a lot of interest on the China market right now especially with the launch of China A50 by SGX. I note that you have China A50 available on your platform. Will you be talking about the China A50?
I am bullish on Chinese stocks, as I am Indian stocks. However, it can be a fairly wild ride and traders need to be prepared to incorporate increased volatility into their risk and money management strategy when trading these markets.
I am a trend trader, therefore I have kept a close eye on these two markets over the last 12 months and the trend and momentum in these indices have been strong. Certainly these are two markets that we need to cover off, especially with the People’s Bank of China (PBOC) joining the great monetary easing debate.
Reasons to attend 'Market Outlook 2015' Seminar
Please give readers two reasons why they MUST MUST put aside their appointments on 12 February and spend the evening with you and your co-speaker(s).
I am going to share how I see the financial world and what I believe is really going on behind the headlines. I believe central banks are purposely manipulating certain asset classes with the idea to boost others. As every financial text book tells us, stock markets are supposed to reflect economics, not used to drive economics. But it is my view that central banks are specifically targeting a higher stock market to boost sentiment and ultimately drive boost inflation.
I am sceptical this proves to be successful in the long-run (which could be hugely bearish longer-term), but in the short-term I am going to follow the central banks lead and stay bullish on markets where central banks are actively pursuing a higher stock market.
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When and where
The seminar will be held at Maxwell Chambers, 32 Maxwell Road, #03-01, Singapore 069115 on 12 February 2015 from 7.15pm - 9.15pm.
On the day, registration will open at 6:45pm and light refreshments will be served. The Seminar will commence at 7:15pm sharp.