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Commodities have been one of the most volatile asset classes in 2022. Energy prices were catapulted in the first quarter as Russia started to invade Ukraine and their performance has been a rollercoaster ever since.

As of the end of 2022 supply remains tight. Concerns about global growth slowdown on the back of aggressive rate hikes from central banks have been keeping a lid on oil prices. The general feeling going into 2023 is that economies worldwide are going to face contraction in the first half of the year, before returning to growth thereafter.

To counteract the downside risk, the recent EU embargo and G7 price cap on Russian oil alongside the end of the US SPR releases should continue to keep supply conditions tight. Moreover, OPEC+ has been unusually proactive throughout the year to balance out the excess supply so this is likely to continue in the new year, and the increasing likelihood of a Chinese reopening in the first half of the year will likely help oil prices edge higher.

Adding to the argument of oil prices remaining supported is the fact that we may be coming to the end of the hiking schedule for most central banks. Peak rates have not yet been reached and there seems to be a lack of consensus on what they’ll actually be, but the messaging from most banks has started to show a “pause to assess the impact so far” approach. This means that economies may actually fare better than originally expected throughout the first quarter of the year, and oil demand may not take as big a hit.

Finally, the development of the Russia-Ukraine war will continue to be of high importance in 2023. Despite there being no peace agreement in sight, a de-escalation of tensions would slowly return crude flows to pre-war levels but the removal of supply-side risks would be the prominent theme and this would bring oil prices down. 

1 December 2022 —Fear of missing out (FOMO) sentiment has returned to global markets as Fed officials signalled the need to pause the pace of rate hikes, prompting the dollar to fall and risky assets to surge.

As US economy and inflation data show the first signs of a slowdown, investors are effectively questioning the Fed's ability to overtighten, despite Fed Chair Powell's assurances that there is still room to hike.  The most recent set of data— including October’s lower-than-expected US inflation data, job openings  and declining private sector activity — pushed market participants to lower their expectations for further Fed interest rate hikes.

Fed funds rates are now priced to peak at 4.96% in May 2023, with investors already factoring in a near 40 basis point cut in the second half of 2023. As prospects for Fed rate hikes slow, interest rate differentials between the US and the rest of the G7 narrowed, causing the dollar to fall against other currencies, particularly the yen, the euro, and the pound, which have been the laggards in 2022.  

Poor economic news is, in this specific context, good news for bonds and stocks as a recession or a slowdown is considered the remedy to bring inflation and rates down. As rates had been the death knell for risky assets throughout 2022, recent swings have provided considerable respite to equity markets with the S&P 500 recovering above 4,000 points and smashing the 200-day moving average.

Despite some early hopeful signals, the war against inflation is far from over. Before we can actually observe a declining trend in inflation towards the 2% target, we must first have a period of below-trend growth and growing unemployment. Given labour market tightness, rising wages, unsolved geopolitical concerns in the global energy market, and stickier-than-expected service inflation, inflation risks remain. 

As we approach the end of the year, institutional investors may begin to take profits or reduce losses on this bear-market rally, which may cause some price reversals.

18 November 2022 - UK markets this week reacted to the UK Chancellor’s Autumn statement, which highlighted the challenges that the UK economy will face in the next few years— where the focus was around the fact that households would see a record 7% drop in living standards. Meanwhile, the OBR judged that the UK is now in a recession this of course is largely in line with the Bank of England’s bleak forecast of the UK economy. This is likely to impact GBP going forward. 

While the Pound has seen a sizable rally in recent weeks to briefly break above the 1.20 handle, there appears to be little appetite to look for more upside in GBP at current levels and instead, the currency is at risk of underperforming in the near-term against its counterparts given the bleak economic outlook. What’s more, while the latest CPI report showed inflation rising to a fresh 41-year high of 11.1%, markets remain split on whether the Bank of England will go ahead with a 50 or 75 bps rate hike.

More widely, equity markets remained on the front foot this week, however, the S&P 500 has yet to surpass its longer-term moving average which has largely defined this bear market trend. As such, until that point is reached, the market bias remains for rallies to be faded. The rise in geopolitical risks and subsequent pullback in equities stemming from reports that a Russian missile had hit a Polish village had been brief after it transpired that the incident had occurred had been a stray from Ukraine’s air defence. 

Elsewhere, hawkish comments by Fed’s Bullard served as a reminder that the Fed wishes for tighter financial conditions to bring inflation down and thus emphasises that there should be caution if attempting to chase equity markets higher. Alongside this, the dollar’s attempt at a recovery from oversold levels had been helped by a softer EUR/USD amid reports that the ECB could look to slow the pace of rate hikes to 50bps.

Across the commodity space, oil prices have struggled with Brent crude slipping below $90 as the initial euphoria of China looking to deviate away from its zero-covid policy peters out, while rising covid cases have once again flagged demand concerns from the second largest economy. Consequently, oil prices are on course to post their largest weekly sell-off in over 3-months. Looking ahead the path of least resistance will likely be tilted to the downside. 

28 Oct 2022 - Markets are having to pay more attention to geopolitics than usual. Of course the war between Russia and Ukraine is still making headlines but the recent political chaos in the UK and President Xi Jinping’s renewed premiership in China have demanded a lot of attention in the last few weeks.

The UK has seen three prime ministers in under two months, not a good selling point for any country. The latest change, which sees Rishi Sunak take over Liz Truss after just 6 weeks in office, was in part prompted by incoherent fiscal measures, including unfunded tax cuts. Liz Truss’ fiscal policies caused a dramatic spike in bond yields leading the Bank of England to intervene to maintain financial stability in the UK.

The British pound has suffered badly over the last few weeks but the appointment of Rishi Sunak as the UK’s new prime minister seems to have provided some comfort to investors. His previous stint as chancellor and his clash with Truss regarding her plan to borrow money during an inflation crisis might have contributed to confidence with investors  potentially seeing him as better suited for the job in current conditions. That said, the UK still faces many challenges ahead, not least the battle to bring down double-digit inflation without damaging growth too much in the process. 

No doubt focus will be firmly on the Bank of England (BoE) meeting next week and how policy adapts, if at all, to the recent moves in markets. Analysts are forecasting a firm hawkish stance from Andrew Bailey and his team, with as much as 100bps partially priced in, but we know from previous experiences they struggle to live up to market expectations. Nonetheless, the pound seems to have found a footing for now, with GBP/USD at a 6-week high, before ‘Trussonomics’ took place. 

The move higher has also been aided by the recent weakness in the US dollar, with the dollar index trading below 110, its lowest level in 5 weeks. The main reason thought to be behind this move is expectations of a less hawkish Fed in the near future. There is little doubt that the meeting next Wednesday could  bring another 75bps hike but markets are now pricing in a higher chance of a rate cut in 2023 as concerns grow over the health of the US  economy. 

There is also month-end rebalancing to take into account, which favours a selloff in the dollar to balance the move in equities but we can expect this move to play into next week, at which point the main focus will be on the Fed and most importantly on Powell’s speech, which will be scrutinised for any sign of weakness.

And to round up sentiment for the week, the re-election of President Xi Jinping in China has sparked a selloff in Chinese assets as he has stacked his government with allies and tightened his grip on the country. His enforcement of zero-covid policies is likely to remain for the foreseeable future, putting China and by extension the rest of the world, at greater risk of a recession.

This commentary first appeared in Investing.com.

17 October 2022 - Jeremy Hunt, the new UK chancellor, has confirmed in his statement this morning that a large part of the 45 mln GBP of unfunded tax cuts announced by his predecessor on the 23rd of September will be reversed. The market reaction has been slightly underwhelming given that most of the measures had already been hinted at during multiple media appearances over the weekend, and the majority of the relief trade in markets this morning came on the announcement that the new chancellor would be making a statement later today.

The yield on the 30-year government bond was down around 40 basis points prior to Hunt’s statement, suggesting investors were giving the new chancellor a real chance to reassure them on the new fiscal budget after the Prime Minister’s statement on Friday failed to improve investor confidence.

In normal circumstances, 40 basis points would be a huge move for gilts, but in this case, it only served to reverse Friday’s rally, alluding to the recent volatility in the UK bond market. We have seen a further drop in yields after the statement was released, but the focus will likely be on Hunt’s address to the House of Commons at 15:30 GMT. Cable (GBP/USD) has seen a push higher this morning, trading above 1.30 but a part of the move has been reversed after the statement was released as investors had attempted to front-run the announcement this morning.

The key question going forward is whether this emergency U-turn in policy has served its purpose to stem the loss in investor confidence. The bond market will be a key area to gauge sentiment over the coming days, but if yields continue to come down bringing borrowing costs down with them then we can expect the Pound to gain some traction and reverse some of its recent losses.

07 October 2022 - Front and centre this week has been OPEC+ and its decision to reduce daily production by 2m barrels’ after what they called ‘plunging prices' in the oil market. There is no surprise that volatility has remained elevated this week.

With decent buying support around the mid-US$80 mark, crude oil markets was the most traded market among Capital.com’s global retail client base, with crude oil-related trades showing greater pick up in long-only trades (70% long) at the end of the week.  Earlier  in the week, traders were predominantly shorting crude oil markets (52% long). 

Looking back at the price range before Covid and the Russia-Ukraine conflict, the current levels seem pretty sustainable given the macro picture. In fact, we have seen the Biden administration hint at possible further releases of its Strategic Petroleum Reserve stockpiles to further stabilise prices.

This further tightening of supply has helped oil prices break away from the recent downtrend, but the longer-term trend is likely going to continue to be determined by demand concerns. 

Investors should expect further downside pressure on GBP

But the star of the show this past week has once again been the UK. From government U-turns to credit downgrades, British investors have really seen it all this week. Our traders continued to heavily trade GBP, with long positions increasing slightly in GBP vs the USD as government U-turns and central bank intervention turned the tide for the British pound.

GBP/USD managed to recover some lost ground this week, climbing back above 1.12 (from 1.0340 10 days ago) and sitting comfortably in its descending channel, but a big part of this move is also due to the retracement in the US Dollar and the risk-on sentiment that took over markets at the beginning. 

With the new UK government admitting that the plan to cut the 45% tax rate for higher income payers was a mistake— Investors and traders might have seen this U-turn as a potential means of reducing the cost burden on the government to some extent. But this is only a small part of the unfunded tax cuts proposed by the government, and we have no idea yet how the government plans to fund these new measures. We believe risk premiums on UK assets are likely to remain elevated a little longer. Throw into the mix low consumer confidence and the belief that the Bank of England joined the hiking party a little too late. All of this is likely to force some further downside pressure on the British Pound.

30 September 2022 - The focus once again this week has been centred around the UK, more specifically the UK bond market. The new government has been called into question mere weeks after it was formed as the mini-budget introduced on Friday sent markets into a frenzy.

The 30-year gilt lost almost a quarter of its value between the Bank of England (BoE) meeting on Thursday and the early hours of Wednesday. That’s when Andrew Bailey and his team decided to step in to “restore orderly market conditions” by doing a 180-degree turn on part of its recent monetary policy pledge, halting planned gilt sales and in turn announcing the purchase of long gilts “on whatever scale is necessary”.  

Most of the volatility generated in the bond market stemmed from pension funds, which hold large amounts of longer-dated gilts to meet their payout demand. A lot of these funds also hold derivatives on their gilts, and use them as collateral. When yields started to climb after the budget announcement, funds had to unload their gilts to meet margin calls, which then spiralled into a collective sell-off and a further rally in yields.

But the BoE does not want to be seen taking a step back from its monetary policy and so opted to avert an immediate crisis from unfolding by merely pushing back the start of its quantitative tightening until October 31st, and to send the message that it will not accommodatie the UK government’s misuse of fiscal policy. But it won’t matter to markets, they’ve already perceived this move as quantitative easing and are starting to call into question the independence of the BoE. 

All of this has of course had a detrimental effect on the Pound. The initial reaction to the UK budget was brutal, with GBP/USD seeing the biggest daily drop since the Brexit referendum back in 2016 and pushing the UK currency into the top spot as the worst performing G10 currency so far this year. 

The BoE’s intervention has somewhat helped to soothe fears but concerns remain that the Bank is enabling the government's spending plans. The root problem remains unresolved—the threat of further inflation given the proposed tax cuts.           

The path for the Pound remains pretty unstable in the short-term as there is a lack of bullish drivers. In fact, Prime Minister Liz Truss has added further uncertainty by coming out on Thursday and defending the newly introduced budget, saying it is the right path for the UK, ruling out the likelihood of a reversal. 

GBP/USD staged a strong rebound after the intervention by the BoE but weakness continues to persist. The direction of the currency pair will also likely be defined by the continuation or easing of the dollar strength. We expect any bullish reversal to be faced with strong resistance if GBP/USD continues down its descending slide.

According to European investment trading platform, Capital.com, its GBP/USD traders have increased their short exposure to the GBP during early trading today. At the time of writing, 50% of all GBP/USD trades reported on the platform were short GBP.  This is a significant change in sentiment from earlier in the week when traders were 69% long GBP against the USD (25/9/2022). 

Piero Cingari, Analyst at Capital.com says the run on the Pound may be showing early signs of a potential currency crisis.

“What was once a story about the pound depreciating due to a growing Fed-BoE policy divergence might now have evolved into the early stages of a currency crisis.

The pound has experienced extreme volatility over the past week off the back of the UK government’s Growth Plan 2022. The plan unveiled massive tax cuts and an aggressive  spending programme,  which needs to be financed by issuing more debt at a time when the BoE is raising interest rates and inflation is already at double digit. This move has raised  concerns about the viability of the UK’s public finances and contributed to declining investor confidence. Simultaneously, Gilt yields have risen sharply in response to the growing fiscal deficit markets are anticipating as a result of the UK’s Growth Plan 2022.

The only measure that may turn the tide is if the BoE steps in and announces a significant  rate hike— in excess of 200 basis points— in an emergency meeting and makes a bold statement against currency speculation. Such a move may increase the risk of a recession but failing to do so will only encourage short sellers to keep selling the pound, thereby deepening the currency crisis.”

Chart: GBP/USD yearly performance, Capital.com

The Bank of England (BoE) has defied market expectations by raising interest rates 50bps at their September meeting. Implied pricing showed that market participants were skewed towards a bigger 75bps hike, especially after BOE Governor Andrew Bailey had used the term “forcefully” when referring to the BoE’’s need to combat high and persistent inflation at the previous meeting. This word, in fact, has also been repeated in this week’s statement, but still the bank has deemed that 50bps is enough.

Actually, no. The BoE as a whole doesn’t see it that way. Three of the nine voting members have lobbied for 75bps at this meeting, but they lost out to the majority. These members were of course the ones perceived to be more hawkish, Ramsden, Haskel, and Mann, which is no surprise. Another member voted for a smaller 25bps hike which is slightly surprising and may have confused markets given the current levels of inflation.

In fact, the updated projections from the BoE suggest inflation peaking at 11% in October, which is a drop from the 13.3% predicted at the meeting in August, but nonetheless it suggests CPI may continue to rise over the coming months. The fact the BoE assumes inflation may remain above 10% for the foreseeable future, and yet they continue on their cautionary path of rate hikes, is what might fuel the continued sell-off in the British Pound (GBP).

This is because the UK economy is at a greater risk of stagflation than the US. This term defines a period of high inflation and stagnant growth, and with the BoE predicting a recession over the next 5 quarters, the projected rate of inflation implies the UK economy could be in for some turmoil up ahead.

Compare this to the US, where there is also persistent high inflation, but the Federal Reserve has been acting more forcefully to combat this issue. This alone gives the US dollar a competitive advantage against the Pound. Add on to that the fact that market sentiment is worsening given the escalation in tensions in Eastern Europe and you get further demand for the dollar as a safe-haven asset.

For now, GBP/USD is holding above this week’s lows but the technical setup suggests further downside pressure to come, with a firm focus on the historical lows for the pair around 1.0512, last seen in 1985.

Markets may start to evidence that the three BoE dissidents are right and the Bank could have put their foot down even harder on the hiking pedal. Unless of course, concerns about the looming recession become more important than inflation, at which point the gradual rate hikes the BoE has been delivering make more sense— and might mean the Pound is in a better position for recovery than its major counterparts. Only the upcoming data may be able to shed some light on which side of the spectrum market participants will fall.

This commentary first appeared in Investing.com.

23 September 2022 - The main focus in markets this week has been the host of central banks delivering their updated policy guidance. Four of the major central banks (the Fed, the BoE, the SNB and the Norges bank) all delivered rate hikes, while the ever dovish BoJ remained unchanged. What we are currently witnessing is probably the most coordinated global effort to tighten financing conditions as inflation continues to pose a big risk for most developed economies.

But not all rate hikes delivered were satisfactory enough for the markets. The Bank of England fell short of market expectations once again, opting for a safer 50bps hike rather than the 75bps anticipated. This has left the Pound at a competitive disadvantage once again, causing it to drop to new 37-year lows against the Dollar, aided also by the mini budget unveiled on Friday by chancellor Kwasi Kwarteng. Most analysts see the proposed tax cuts as adding a burden on the UK’s already high debt and also aiding inflation even further, a sentiment perhaps shared by traders this week. No surprise that the Pound, alongside the Euro against the US dollar, were among the most traded currency pairs among our clients this week.

The risk-off appetite continued across other markets with 50% of all Nasdaq 100-related trades on Capital.com short-selling the index. The tech-heavy index, alongside other major US indices, was attempting to recover from the sell-off seen last week after the August CPI showed that inflationary pressures were more persistent than hoped, despite a small respite in energy prices. But risk-off sentiment and the FOMC rate hike has left US indices once again building those losses and heading towards this year’s lows, first seen in June. 

Capital.com traders also took to natural gas markets following another sell-off on easing supply concerns. Meanwhile, volatile oil prices off the back of escalating tensions in Eastern Europe brought more volatility to the oil prices. Gold continued to hold its appeal among our traders as bearish sentiment remained intact amid a rising risk environment.

18 August 2022 - According to data from global investment trading platform, Capital.com, bullish retail sentiment in popular meme stock Bed Bath and Beyond (BBBY) appears to be waning among its traders. This is reflected by the lower number of trades and trading volumes in BBBY over the last two days. 

At the close of trading on Wednesday 17 August 2022, trading volumes in CFDs for BBBY dropped by 21% from its peak a day earlier—Wednesday, 16th August. The number of BBBY trades executed on the platform also fell by over 11% over the same period. At its highest point in the week— 16 August—the platform reported a 432% surge in trading volume for BBBY with the total number of trades climbing by more than 200%. 

Capital.com’s global trading community also reduced long positions in the meme stock —BBBY trades were 72% long at close of trading on 17 August vs. 77% long on the 15th of August. Both long and short position trades saw a drop in trading activity with the number of short position trades falling more drastically (-29%)  than long position trades (-17%) . 

The change in retail sentiment follows news that activist investor Ryan Cohen has filed for a proposed sale of his stake in the struggling home goods retailer. Capital.com’s data also shows a shift in the mindset of meme traders who now appear to be less inclined to support failing companies at any cost. 

David Jones, Chief Market Strategist, Capital.com said: 

“News that Ryan Cohen may be selling his stake in BBBY appears to have spooked the meme stock faithful. Unlike the frenzy of the past— with the likes of GME and AMC— BBBY traders seem more inclined to follow institutional wisdom than to blindly battle for companies with poor fundamentals. 

Could this be a turning point for meme stock traders? Perhaps traders have learnt from the past frenzies that while short term gains can be impressive, sentiment in short squeezes can reverse just as quickly,  so this time around they may be being more cautious.”

It has been another positive week for stock markets with the S&P 500 pushing out to its best levels since early June. Of course, the index is still down by around 10% for the year to date, but this latest recovery will give investors some hope that perhaps a major bottom has been reached.  There have been recoveries along the way this year of course - no market moves up or down in a straight line. These have ultimately run out of steam and the market has turned lower.  But this recovery over the past couple of months is the longest bounce back in 2022 in terms of the time it has been in place, which could help bolster investors confidence that stocks may be past the worst. 

Last week there was much discussion about whether the US was in a technical recession or not, because it has had two quarters of negative growth which is usually accepted as the recession definition. Leaving that argument to one side, clearly the US economy has been weak over the past six months, but interestingly that could also help the argument that stocks have bottomed.  Let’s not forget that markets are always looking forward  - a bounce back by stocks may be suggesting that investors believe any economic downturn is going to be short-lived. The problems of high inflation do not appear to be going away anytime soon - but there is a chance that we could be past the worst. 

The other focus this week was on the oil market, with a meeting of the oil producing nations OPEC+.  In the end this was perhaps something of a damp squib, with the cartel agreeing to raise production by 100,000 barrels per day which was widely considered to be negligible. At the moment oil is hovering around levels last seen in february this year - a good $35 below the highs seen in June. It is difficult in the short to medium term to see a reason why oil should suddenly soar higher again - perhaps a more stable oil price will be another factor to make investors somewhat more relaxed about the state of the world economy.  

This commentary first appeared in Investing.com.

It makes a change to see oil at the top of the list of top traded markets this week.  Back in March, the commodity saw lots of activity as it surged to $126 a barrel - a gain of 70% back then for the year to date. But since then we have seen oil trade in a wide, but ultimately directionless range.  However over the last week it has slipped back to its worst levels since February, on fears of the global slowdown turning out even worse than expected.  It remains to be seen where oil will head for the next few months.  Investment bank Citi for example thinks it could trade as low as $65 if a recession is worse than forecast.  But of course there will be plenty who view sub-$100 oil as something of a bargain, given the year it has had so far. 

Stock market indices are always popular - and the more volatile NASDAQ 100 is at the top of the list in terms of client activity this week.  It’s the second most traded this week after oil with perhaps some starting to think that finally a real recovery is underway. It has rallied by around 20% over the past seven weeks which is turning out to be its strongest recovery so far this year. But as the NASDAQ 100 is still down by around 18% for the year to date, it is another interesting market to watch next week to see if, yet again, another rally runs of steam for stock indices on concerns over the world economy. But for now at least, the recovery has proved resilient with the index hitting its best levels since early May.

There is certainly a somewhat “groundhog day” feeling to financial markets at the moment as the same issue continues to concern investors - resulting in similar moves in certain markets.  Of course, this is inflation   and the latest data out on Wednesday saw this hit another 40 year+ high in the USA.  The market continues to benefit from this cloud hanging over the world economy is the US dollar which again this week hit multi -year - and often, multi-decade highs  - against other world currencies.

In foreign exchange, the euro falling to parity with the US dollar was grabbing headlines - one euro is now only worth one dollar. That is a fall for the euro of 15% over the past 12-months.  And there is something of a double-whammy here for the Eurozone economy as a weaker euro makes imports more expensive - and this all helps fan the flames of inflation.  Round numbers such as the parity situation we have with EUR/USD can make traders think that perhaps this is where major trends will turn.  That certainly can’t be ruled out - but let’s not forget that in the first couple of years of this century the euro was lower still, hitting 0.83 in October 2000.  For now at least the US dollar remains a favourite amongst investors providing at least some safe-haven insulation from the woes that are affecting most major economies around the world. 

Stock markets were also heavily hit by the latest inflation data.  The S&P 500 had been enjoying a gentle recovery over the past three weeks but got knocked back to the lows for the month so far as the news broke.  It still looks to be too early to call the absolute bottom for stocks after what has been a tough year for investors - the S&P is down 12% and its higher tech relative the NASDAQ is off by more than 20%. At the moment it does not look like all of the bad news about inflation is being discounted into the price, judging by the nerves seen on the latest announcement - investors are probably braced for more volatility in stocks throughout the summer. 

This commentary first appeared in Investing.com.

07 July 2022 - The week’s big news is the resignation of the British Prime Minister. The pound did rally on the news - but nothing too earth shattering.  The driver behind pound (and of course, euro) weakness this year has been dollar strength rather than any local political problems.  A change of leader in the UK is probably unlikely to be the cause of any major recovery in the pound from its current depressed levels.  The ongoing inflation concerns and the real threat of a global recession continue to be far more important in the mind of markets.

The energy markets have been very much in focus this year following the Russian invasion of Ukraine and the impact that the soaring of oil and gas have had on inflation and the resultant cost of living crisis. The volatility seen regularly in crude oil makes it a popular one amongst traders - and the last couple of days have been no disappointment on that front.  Tuesday saw oil drop almost 10% in one day - its largest one day fall since March. Concerns about the ongoing slowdown in the global economy - and the real risk of China slipping into recession  - spooked traders into thinking this could really impact  demand for crude oil later this year.  A 10% fall in one day makes for an eye-catching headline, but whenever oil has traded below $100 a barrel since Russia’s invasion it has not stayed there for long. It will be an interesting market to watch over the next few days to see if bargain hunters step in - or whether this is actually the start of a more sustained sell-off in crude after more than two years of relentless gains.

Once again the tech-biassed NASDAQ 100 index has proven to be the most popular with our clients over the past week.  There’s been plenty of day-to-day volatility, but very little actual change from where the NASDAQ ended in June. At the moment, 90% of Capital.com’s global trader community who have an open position in this index are long - speculating that the price is going to rise. Buying the dips was a very profitable strategy through much of 2021 - but it has of course been a different story this year with the index down by more than 25% for the year to date. Of course there will come a point where all of the bad news and expectations for potential further rate rises get discounted into the price and maybe the 11,000 lows hit in June could prove to be a temporary base for the NASDAQ100  - but traders should remain aware that this year has ultimately seen any rallies run out of steam.  Any bounce from here may mean traders have to be nimble to book any profits in case the index turns down once again.”

24 June 2022 - According to data from global investment trading platform, Capital.com, 38% of trades placed by its clients so far this quarter are short, which is 15% higher compared to the same period last year.   This may suggest that traders have been getting more bearish as the year goes on —although of course as a total group most are still favouring the long side of the market. 

David Jones, Chief Market Strategist, Capital.com: 

“Given the size of market slides— across all sorts of asset classes this year—it is perhaps not surprising that more traders are choosing to short-sell,  to perhaps position themselves to profit from further market weakness, or even hedge other investments. 

Once again it is the NASDAQ 100 that has proved to be the most popular market with traders this week.  Volatility always attracts traders - and we still continue to see sizeable swings in global stock indices.  Only last week the NASDAQ traded down to its lowest levels since November 2020.  The last few days have seen something of a bounceback but at the moment, opinion seems split as to whether this is a sustainable recovery or just another dead cat bounce before the market slides lower once more.

The area that has seen the largest jump in short trades is commodities. This may suggest— for some traders at least—there is a level of comfort in trying to call the top in the great commodity bull run that has persisted for at least the last couple of years.  Of course, a fall in commodities would be welcome by many economies around the world as it would help to slow the rise of inflation.

After the NASDAQ index, the next two most traded markets on Capital.com over the past week have been in the energy grouping: crude oil and natural gas.  During June, West Texas Crude has travelled from above $120 a barrel back towards $101. Although lacking any firm direction, these sort of swings provide plenty of day to day volatility to attract shorter-term traders.  Natural Gas has been more volatile again compared to crude oil with geopolitical developments an important driver for this market recently, as Europe tries to find alternatives to Russia for its energy requirements. This month US Natural Gas has dropped by 38% in under three weeks - it remains to be seen whether we have seen an important top in this market for now - or whether this is just another buying opportunity before the price races higher once more.” 

Is Negative Sentiment The Perfect Set-Up For A Market Shock?

Even the casual observer of financial markets will probably have noticed the various headlines announcing that the S&P500 is in an “official” bear market, with the broad US stock market index down by more than 20% for the year so far - and we are not even six months into 2022.  Last week saw stocks slip further again, with the S&P trading back to levels not seen since December 2020.  It really has been a brutal few months for many markets and last week also saw the US central bank, the Federal Reserve implement its most aggressive rate rise for decades. 

But investors still seem to be worried that the various policy makers around the world are being outpaced by ever-rising inflation - the uncertainty about just how the cost of living will rise, coupled with just how high rates will need to go to try and combat this is fuelling the risk-off attitude we are experiencing in all sorts of assets. Although dipping sharply over recent days the US dollar still remains a popular destination in these uncertain times-  the US dollar index is up by more than 8% this year and against currencies such as the Japanese yen, the greenback is trading at a 20 year high.  Gold, the traditional inflation hedge and safe haven in times past, is broadly unchanged for 2022 so far and definitely seems to have lost some of its appeal as the default destination when panic stalks markets. 

This all sounds fairly gloomy  - and it is.  It is quite the challenge to find much in the way of positive economic news at the moment.  But students of market psychology would point out that when pessimism seems to be at an extreme, this can often be the time that markets surprise many of us.  There does come a point when the most recent batch of selling has been done as investors feel further falls - and in effect there is no-one left to sell.  This is an oversimplification of course but do not be surprised if we saw at least some sort of comeback for global stock markets in the weeks ahead.  For now at least that wouldn’t be enough to change from a bear to a bull market - but it could give everyone some respite from a constant sea of red on their screens. 

This commentary first appeared in Investing.com.

Natural Gas hits 14-year highs as market outlook remains uncertain

27 May 2022 – Once again it is all about stock markets as far as the top traded asset for the week is concerned.  The NASDAQ100 looks set to finish the week higher than where it started - but day to day there is still something of a tug of war between the bulls and the bears. Despite a slight bounce this week, the index is still down almost 25% for the year to date and the jury is still out as to whether we have seen the worst for markets - or if there are deeper slides to come. 

Natural gas is the current market that continues to defy gravity. Moves here are being driven by geopolitical events as Europe tries to turn away from Russian Gas - meaning the US Natural Gas contract hit its best levels since 2008 this week. It is certainly not a market for the faint-hearted - just in May it traded through a 30% range which is a strong amount of volatility for what is after all a fairly major commodity. Plenty have tried to call the top all the way up - Natural Gas is up by around 130% for the year to date. Those top pickers have had their fingers burnt and it remains to be seen whether these latest 14 year highs are a temporary peak. Given how volatility is like catnip to traders, it is a market that is likely to continue to attract attention. 

20 May 2022 – The stock market rout continues - so it is not surprising that the most popular market this week amongst our clients has been the NASDAQ index. In just the last few days it has travelled through 700 points of range - a swing of more than 5%. It would seem that many investors are trying to call the bottom of the falling knife that is the plunging stock market at the moment - the high tech NASDAQ index is down by around 25% for the year to date and we are not even six months into 2022. So far at least, stocks have yet to find a permanent base in this year’s slide and although some clients are looking to profit from the slide by short-selling, the majority are still looking to buy the bounce - but these are proving to be short-lived. 

It is more surprising to see oil so popular still and in second place of the top traded markets on our platform - the last couple of months have seen crude trade broadly sideways, after the Russian invasion-inspired surge. Some clients do still seem to expect another explosion higher in the price of energies - although opinion is more split on oil than equities. Around a third of clients trading oil are actually expecting a fall. Clearly this is still very much a news-driven market and even though the last few months have seen low volatility by recent standards, any developments in the Russia/Ukraine war can change sentiment very quickly - in either direction.

6 May 2022 – It’s no secret that volatility is like catnip to traders - and stock indices have had plenty over the last few days. Of course, Wednesday saw the latest rate decision from the US central bank and this can often inject some crazy swings in markets - this week has not disappointed. Wednesday and Thursday saw the NASDAQ100 index swing through 800 points of range - around 6% in a couple of days but it goes into the end of the week where it was at the beginning. Lots of noise but no real direction has been a theme for many stock markets in recent weeks with the jury still split as to whether the falls so far this year are a great buying opportunity - or just the first step in a much more serious bear market. 

Given the wild swings for stocks, the casual observer might have expected gold to do well.  But again here it has been a case of up one day and down the next. This week saw gold trade briefly to its worst levels since mid-February - but there appears to be a hard core of gold traders who seem happy to buy the dip, given the prospect of ongoing geo-political uncertainty and the continuing inflationary backdrop. What has been holding gold back has been the ongoing strength in the US dollar - the dollar index briefly hit a 20 year high this week.  If traders start to think that perhaps the US dollar has gone far enough for now and we see at least some weakness, then that is something that could help gold recover from these levels.

29 April 2022 – This week’s two top-traded markets, the NASDAQ100 index and gold, perfectly illustrate the somewhat “Groundhog Day” tug-of-war going on between investors and traders right now-and the general air of confusion about what the next few months will hold. As we saw in the first quarter of this year, as highlighted in our Capital Pulse report on trader activity, the likes of oil and gold experienced a sharp uplift as the Russian invasion of Ukraine got underway, and stock markets remained under pressure. Now, the price of oil and gold have fallen back - but stocks are hardly booming. So the two top-traded markets of the NASDAQ100 index and gold perhaps show the split between those who think stocks are undervalued - and those who think there is more uncertainty to come and favour the safe haven of the yellow metal.  

It seems unlikely this split is going to change anytime soon. Just this week we had news that the US economy shrank in the latest quarter - market expectation was for a slight increase. Let’s not forget of course that another quarter of negativity means that officially the US is in recession. This is the quandary facing central banks - raise rates to cap inflation - but do it in such a way that you don’t choke economic growth. Much easier said than done of course and I do not think at the moment that anybody can forecast with any certainty just what the rest of 2022 will look like, and whether the central banks can actually pull off this fine balancing act. 

The reluctance of the European Central Bank to raise rates is one of the reasons that the euro is having such a tough time of it, with EUR/USD falling to its worst levels in more than five years. This, coupled with the continued US dollar appeal as a safe haven destination in a time of ongoing geopolitical uncertainty, has seen the single currency drop by 7% against the greenback just this year. At the moment our clients seem to think that the end of the slide is nigh with more of them positioning themselves to profit from a bounce. Back in 2016, the euro did end up making a base not much lower than where we are now and then stage an impressive comeback over the next couple of years.  But of course, the economic backdrop is very different today - it will be a fascinating market to watch in the months ahead.

This week, the most traded instrument by volume on trading platform Capital.com was the NASDAQ index. Among the most traded stocks was, perhaps unsurprisingly, Twitter, which this week saw its traded volumes on Capital.com increase by 7000% compared to last week.

Commenting on retail sentiment this week, David Jones, Chief Market Strategist, Capital.com, said:

“Shorter term traders are usually attracted to volatile markets - by definition, they are usually hoping for a significant move either up or down and are not taking a long term view on that asset. This week’s top traded market, the NASDAQ100, has had volatility by the bucket load over recent weeks. Just since the middle of March the index has travelled through a 2,000+ point range and this week saw it, at its lowest point, drop by 4% from Monday’s high. At the moment it seems as if stock markets are playing a game of tug of war with investors' emotions. It is still not clear whether the worst of the slide is over for this year, and we can expect further recovery; or whether the latest rally is just a so-called “dead-cat bounce” before the market turns down. Either way, it is likely to be a market that keeps traders busy in the weeks ahead.

Although the social media stock Twitter does not make the top list for the week, it has seen a massive uplift in trading activity. This is of course down to a certain Mr Elon Musk acquiring a 9% stake in the business. Can the man behind Tesla’s stellar success turn around the fortunes of Twitter - or is Musk’s interest just a flash in the pan? The stock rose on the news, up by more than 25%, although traders have cooled towards it in recent days with the price falling back. With Elon Musk now being offered a seat on the board - and of course an active tweeter himself - whatever the short term future brings for the social media business, it probably will not be dull.”

Crude Oil is once again the most popular instrument among retail investors on investment trading platform Capital.com this week, followed by Gold and the NASDAQ index.

Commenting on retail sentiment this week, David Jones, Chief Market Strategist, Capital.com, said:

“In some ways it is quite surprising to me that Oil is still the top-traded market amongst our clients. Obviously crude is still very much in focus because of the ongoing war in Ukraine following the Russian invasion - and there is plenty of price volatility. But it has been fairly directionless over the last three weeks and some traders may take the view that the highs seen at $126 in early March are something of a significant watermark for the price, and perhaps signify a top for now in this great run for oil.

When it comes to the NASDAQ, it is not surprising to see that it is near the top of the table for popular markets. Following the low made on 15 March, the technology index has rallied by more than 15%. That is a massive move in just two weeks and has pulled the NASDAQ back to where it was at the beginning of February - clawing back the losses made (and more) following Russia’s invasion of Ukraine. But with the geo-political backdrop still uncertain and high inflation unlikely to fade any time soon, perhaps some traders will start to question if the recovery in stocks has got ahead of itself for now, and may look to try to book at least some profits, following this rise.

To finish up, just when we thought the meme stock fad was so 2021, the two old stalwarts - GameStop and AMC - are back with a vengeance over the past couple of weeks and US cinema chain AMC was the fourth most popular market with clients this week. The AMC stock price has more than doubled over the past two weeks but there have been some signs of nerves from investors creeping in over recent days, with a short-term switch in sentiment that has seen the stock fall back. So what next? If there is one thing that the past 18 months might have told us about meme stocks, it is that those late to the momentum-party tend to be left out in the cold. Either way, some traders do love volatility, so AMC could remain popular for another week at least.”

Retail investors on investment trading platform, Capital.com, are turning their attention to the Nasdaq 100 once again this week. Oil and gold remain popular markets on the platform but will they retain their top spot or will investors turn more bullish towards stocks in the weeks ahead? 

David Jones, Chief Market Strategist, Capital.com, said:

Although it is Groundhog Day when it comes to what the most popular markets are this week, I really don’t think that’s the case with market sentiment at the moment and perhaps we have seen a real shift. If we take the NASDAQ index, this has rallied by 13% since the 14 March low. It has been a couple of months since we have seen a recovery of that magnitude. Ultimately that rally ran out of steam and this will be the interesting point to watch for next week - is this just another “dead-cat bounce” in stocks, or is sentiment actually starting to shift after what has been a brutal year so far for these assets? So it is something of a waiting game - but I think there will be a clearer picture in a week's time as to whether investors have switched their stance and started buying the dips once again, rather than selling rallies. 

Which brings us to gold. This has always been a popular market and the ongoing war in Ukraine is probably fueling part of the current investor demand here, due to the yellow metal’s traditional safe-haven status. Gold is holding up near its best levels for the past couple of weeks - but it is still more than $100 below the early March peak. There is an argument here that we may well have seen the best levels already for gold for some time - what needs to happen next for it to surge once more? The risk here is that gold could remain vulnerable to a sharper sell-off if investors really started to once again embrace riskier assets, like stocks. 

Crude Oil is once again the most traded instrument on Capital.com’s trading platform this week, lifting the share of commodities trading volumes to 34% of all trading activity, comfortably surpassing those of indices (23%) and individual stocks (9%).David Jones, Chief Market Strategist, Capital.com, said:“We shouldn’t be surprised that yet again oil and gold top the most traded charts for the week. I think it is fair to say that over the last ten days these markets have seen a pricking of their short-term speculative bubbles, which were driven by traders' reaction to the Russian invasion of Ukraine. Earlier this week, West Texas Crude dropped back to $93 a barrel - a fall of 25% in a little over a week. But as Oil and Gold have dropped back, traders are perhaps viewing this as a second bite of the cherry - an opportunity to buy back in once again. Geopolitical uncertainty is still clearly there in abundance - and the economic outlook still remains uncertain so for now at least it seems that some think the rise for these two is not over yet.Apart from Russia/Ukraine, the focus this week was on the latest interest rate decision from the US Federal Reserve. In what has to be the most accurately forecast rate change in years, as expected the fed bumped rates up by 0.25%. After an initial early wobble, stock markets saw a strong finish which continued into the next day with the NASDAQ100 hitting its best levels for a couple of weeks. This is always a popular market with our clients and although it has had a good week, we have seen plenty of false dawns in the downtrend for US indices. It remains to be seen whether this is the start of a real recovery - or just another dead cat bounce like so many others this year.”

Figures out today from Capital.com show that trading volumes have surged by more than 2,000% in USD/JPY in the last 10 days. The global retail trading platform also noted a change in sentiment with 49% of traders now largely shorting USD/JPY. One week ago (8/3/22), Capital.com traders were 61% net long USD/JPY. This comes ahead of the Bank of Japan (BoJ) interest rate decision expected later this week.David Jones, Chief Market Strategist at Capital.com, said:“Traders are betting that the current weakness of the yen has been overdone, as USD/JPY pushed out to its best levels since December 2016. The US dollar has been seen as something of a safe haven destination this year and just in March the dollar has climbed by around 2.5% versus the Yen.  With the Japanese central bank, the Bank of Japan, meeting towards the end of this week, it does seem that some traders at least are betting there is the potential for surprises here, although the BoJ has been
adamant so far in ruling out any rate changes to combat its own inflation problems. Nevertheless, volatility attracts traders and with the surge in USD/JPY this month it's not surprising that it has caught the interest of many of our clients.”Is the tide finally starting to turn for EUR/USD?The other currency pair making waves is EUR/USD. Capital.com has noted a 3,398% rise in traders clamouring to the EUR/USD currency pair since 28 February 2022. EUR/USD trading volumes have grown by 835% over the same period.“The last 12 months have not been good ones for the euro - with the single currency dropping by around 12% versus the US dollar.  The dollar has had a good run overall, as many have seen this as a safe haven destination in times of uncertainty and we have had plenty of that with Covid and Russia's invasion of Ukraine.  But is the tide finally starting to turn for EUR/USD? March saw the currency pair trade to its lowest since may 2020 - and back then the whole 1.06/1.08 area did prove to be a turning point, and the base for a sustained euro recovery.  Whether that proves to be the case this time remains to be seen but given the run the US dollar has had just this year, nevermind over the past 12 months, some traders at least are taking the view
that it is time for something of a retracement in the greenback's fortunes and it could be time for something of a euro comeback, at least in the short-term,” added Jones.

“It’s not surprising to see what the three most popular traded markets have been with clients this week. As the Russian invasion of Ukraine continues, it is not surprising that oil is seeing most activity. Just over the last week the price of crude is up by more than 15% - and has gained a staggering 40% so far this year. Many of course were expecting the price of oil to see increased volatility in the event of a Russian invasion - but I think very few would have forecast it hitting the sort of heights it has so quickly. About a quarter of our clients trading oil seem to be taking the view that the strength has been overdone and are positioned for a slide in oil. Given that some days are seeing swings of around 10% for the price of crude it’s a popular market for traders looking for some volatility - but being on the wrong side of shorter-term momentum can be a painful experience. 

Gold has enjoyed a resurgence over the past month or so - after being broadly unloved by traders in 2021, as it dropped 3%. But I think it’s fair to say there is still some caution amongst traders about how high the precious metal might go. On the day of the invasion, it touched $1,975 per ounce - but then gave up those gains the same day. As this week draws to a close we have seen gold gain - but it is still around $30 below that February high. I wonder if $2,000 is still a step too far for gold at the moment and perhaps any traders who have been in the position for a while might be thinking about taking profits on any move back towards this psychological level.”

The prospect of Russia invading Ukraine has been brewing for several weeks of course - but when it actually happened in the early hours of Thursday morning, it still served to surprise most traders. For those of us who watch the various gyrations in all sorts of financial markets, volatility is not a new thing - but it is still quite rare to see such big swings indiscriminately across virtually all assets.  

Oil was always going to be an obvious focus for traders as the news of the Russian invasion broke. After closing at around $92 a barrel at the end of US trade on Wednesday, the West Texas crude oil blend has touched $100 so far today - with the futures markets and Brent oil trading higher still. The oil market has been a firm favourite with Capital.com clients all week - the price has been edging higher as tensions escalated and today we are seeing more than double the volume from clients in oil, compared to the average daily activity for the week so far. 

There is the well-worn phenomenon of “buy the rumour, sell the news” that could be applied to many markets at the moment. It’s when markets creep in one direction ahead of an unexpected event - and when that event actually happens the market ends up doing the opposite to what was expected. So far at least in oil, traders still seem happy to buy the dip but it will be an interesting 24 hours to see what happens,  as activity perhaps gets back to more typical levels. It could be that the consensus of opinion is perhaps the oil price has overshot to the upside - it is, after all, already up almost 30% for the year to date, and we are not even two months into 2022. 

Unsurprisingly, gold has been another popular market. After a disappointing 2021 that saw the yellow metal lose around 3%, February has proved to be the perfect storm for gold - with inflation, falling stock markets and geo-political uncertainty boosting its safe-haven appeal.  Today’s move saw it blast through the 2021 high point and reach its highest in 18 months. A large chunk of today’s gains have been given back as time has gone on  - though this still leaves gold up around 6% in February.  Markets are hard to predict at the best of times and days like this can see traders gritting their teeth and just holding on through the wild gyrations. It may not be too surprising if some of the more extreme moves seen today retrace, at least partially over the next few days, leaving some to regret acting in haste and licking their wounds over the weekend.

Given the geo-political backdrop over the last week, it is perhaps not too surprising that Oil, the NASDAQ index and Gold have proven to be the most-traded markets by our clients. These markets all had quite different weeks, and have appealed for different reasons - but the story for this week’s trading activity actually started last Friday night. 

After European markets had closed, the US President seemed to suggest that a Russian invasion of Ukraine was imminent. This saw the US crude oil price jump by $2.50 in under half an hour. Once again, oil was setting fresh 7-year highs but this time around it wasn’t due to ongoing economic recovery, but might be the threat of war. Over recent days there have been various murmurings of some sort of diplomatic solution to the situation in Ukraine - and this may have causedseen oil to back off. But it looks like gold traders may not be quite as ready to believe the worst may be behind us. 

After a disappointing 2021, where the yellow metal lost around 3%, this year might have been something of a “perfect storm” for the gold bugs.  

Higher inflation? Check.

Stock market uncertainty? Check.

Geopolitical threats? Check.

So the historically renowned classic safe haven destination might have  been doing its thing and so far gold has risen by five percent in February. It may be a solid performance and may put the gold price back to where it was last summer. But $1,900 might have been something of a proverbial line in the sand for gold strength. It will be interesting to watch next week, to see if this may prove to be a barrier to any further upwards progress.

As the year of the tiger is underway, it seems apt to drop in the expression “may you live in interesting times” to describe markets at the moment. We have certainly had some interesting times so far this year, and it’s not even the end of February.  Whereas in 2022 stock markets steadily ground higher, with investors more than happy to buy the occasional dip, this year continues to be somewhat more challenging so far. The latest US inflation number released this week was interesting to say the least. The cost of living in the USA, as measured by the consumer price index, is 7.5% on an annual basis. This has been the fastest annual rise in 40 years and was ahead of analyst forecasts.  

The inflation data was something of a surprise to traders, erasing a couple of days of gains in stock markets and seeing a jump in volatility in foreign exchange and bonds. We all knew that inflation was the hot topic coming into this year, but as the numbers continue to surprise, it’s fair to say that investors are still undecided about what this may mean for many markets in the months to come. Following this week’s data, some traders now believe that the next interest rate decision due in March from the Federal Reserve may have to be larger than expected as inflation continues to remain persistently higher than many were anticipating.

With all of the inflation uncertainty, gold briefly nudged above $1,840 an ounce to actually be positive for the year so far. Inflation and gold provide an interesting conundrum for many investors. On the one hand, precious metals are commonly seen as the classic hedge against rising prices - historically, a safer destination in times of uncertainty. But if the US Federal Reserve were to take a much more aggressive approach to raising rates then that would traditionally be good for the dollar. And a rising dollar usually puts pressure on gold. Quite who will win in this tug of war remains to be seen - but after what may be considered a fairly dull 2021 for the yellow metal, gold could be one to watch in the year ahead. 

There's a famous quote attributed to JP Morgan (the man, not the institution) when asked what he thought the market would do in the future. "It will fluctuate" was his considered reply. And that is probably the safest thing to say about markets at the moment.

Stock markets started the year by falling substantially in January - at its worst point, the broad S&P 500 index was down by 7.5%, and that was only the third week of the year. Part of those losses have been erased, but stock markets are still experiencing significant intraday swings.

Then, of course, there are individual stocks. Meta Platforms Inc (NASDAQ:FB) was making headlines this week, as 30% was wiped off its value in terse order - from Wednesday to Thursday's close, to be precise.

I think it is fair to say that the JP Morgan approach is probably the correct one for now - expect volatility. There's another famous saying, "no one rings a bell at the top of the market." It's only one month since the S&P set fresh all-time highs, but it is still too early to call whether that was the absolute top for a while - or all of the recent slides are just another buying opportunity before the market powers back to life again.

But with some of the old favorites like Meta and Netflix (NASDAQ:NFLX) under the cosh this year, this sell-off certainly feels different from what investors have been through over the past 18 months.

One market that has continued its long rise is the oil price. As of Friday morning, the oil price is above $90 a barrel, the highest seen since October 2014. This is great if you are a shareholder in oil companies - not so much if you're a central banker trying to contain inflation.

The Bank of England raised rates as expected this week, but with commodities such as oil continuing to pile the pressure on the cost of living, it looks like central bankers are destined to play a game of catch up for some months.

Investors hoping that this week would shed more light on whether we are heading into a bear market will probably still be scratching their heads on Friday. Monday did not start well, with the S&P 500 index briefly plunging to its lowest level since June 2021.

This is quite the achievement given that it was barely three short weeks ago that the broader benchmark had moved out to fresh all-time highs once more. The size of the sell-off to start the week very briefly put the market in “correction” territory having dropped by 10% from its high.

Since then the market theme has been lots of noise, very little direction. Each day has seen some wild swings by normal standards but for now at least we have yet to see a sustainable recovery from those 7 month lows. It looks like investors are set to enter February still on the edge of their seats, trying to decide if this is a great buying opportunity - or just the first step in the next bear market.

Wednesday saw the latest announcement from the US central bank, the Federal Reserve. As was broadly expected, there was no change this time around but the prospect of a rate rise in March is now the favoured forecast by markets.

Of course this is all to try and keep a lid on inflation which looks set to be a much bigger problem this year than any central bankers thought at the beginning of 2021. Hardly helping the cost of the living crisis was the price of oil. Friday saw it yet again scrape out a fresh 7-year high as West Texas Crude moved through $88 a barrel.

It's perhaps not often we feel sorry for those who work at central banks and try to manage the economy, but this year it does not look as if that is going to be an easy task by any stretch.

21 January 2022 – Given the ongoing volatility in stock markets, it is not surprising that the NASDAQ-100 remains the most popular traded market among Capital.com traders. This week, it hit its lowest levels since mid-October - but clients still seem to be keeping the faith with the tech sector. Out of clients who have a trade open globally, around 85% are buyers. Buying the dip has been a strategy that has well rewarded investors over the past 18 months - but we have started this year with the backdrop of higher than expected inflation, so it remains to be seen whether sell-offs in stocks are the bargain opportunities they were all the way through 2021.

Earnings season is underway in the US, where we find out how good or bad the latest quarter has been.  What is interesting here is that full year results for listed companies should have a relatively buoyant comparison with a tough performance in 2020 as the pandemic gripped the economy. As 2022 continues, companies' earnings may be having a much tougher time compared with those from a year ago - this is another reason why we may well have seen a note of caution for stocks coming into this year - are companies going to find it hard to continue to grow earnings after the post-COVID bounceback?

With the continuing large swings across stock markets, traders can perhaps be forgiven for missing out on a major move in the price of oil. Surprisingly for some, oil has put in a sterling performance for the month to date - up around 13% from where it finished last year. It has been driven by supply concerns as the global economy continues to expand - Goldman Sachs, for example, reckons that world oil inventories are set to hit their lowest levels for 20 years, at some point during 2022. The net result was crude oil reached its highest in more than seven years. Whether this means that oil is going to hit the magical $100 a barrel mark remains to be seen, but it is likely to stay a favourite with clients in the weeks ahead.

14 January 2022 – The two top traded markets in the UK this week are a good proxy for what may well be a fight to win the battle for the hearts and minds of investors this year. The tech-focused NASDAQ 100 index and the gold price had two very different years in 2021. The NASDAQ was up 26% last year, while gold was uneventful and ended the year down just over 3%. The backdrop for 2022 is different - so far at least - with inflation still the main theme front and centre. 

This week’s US data showed inflation at its highest in 40 years and it remains to be seen whether that will temper investors' appetite for risk assets such as stocks and lead them to the safer haven of gold. Or perhaps markets have taken the view that this higher cost of living is just temporary and it is business as usual. Either way, it would not be surprising to see further volatility for both of these markets in the weeks ahead - or at least until investors find something else to worry about.

Perhaps the surprising market performance for 2022 so far is the price of oil. We are only two weeks into the year and already the crude price is up by 9%. Given concerns coming into this year about whether the pace of economic recovery was going to continue, some may have expected a more cautious start for the oil market. But it has got off to a flying start so far and has pushed within a couple of dollars a barrel of last year’s seven year high, set in October. It may be an interesting one to watch in the week ahead to see if, once again, traders start to get nervous ahead of these old highs and start to take some risk off the table. 

Although gold underperformed in 2021, it hit an all-time high of $2,084 as recently as August 2020, David Jones, chief market strategist at Capital.com, says. “Yet those glory days do feel well behind it at the moment.”
Some die-hard gold bugs believe that gold is due a good year after recent struggles, Mr Jones says. “It could do well if the economic bubble does finally pop.”

Many investors believe that gold is due a good year after recent struggles, said David Jones, chief market strategist at Capital.com. "It could do well if the economic bubble finally pops."

Investors had just started to breathe a little more easily when news of the variant broke, David Jones, chief market strategist at Capital.com, says. “With vaccines rolling out and economies opening up, Covid was not at the forefront of investors’ minds, then panic set in.”
We should not overstate the damage, Mr Jones says. “At its close on Friday, the broader S&P500 had only been knocked back to where it was at the end of October, while the Nasdaq stood at a two-week low.”

It has been a cracking year for commodities, with oil rising 60 per cent, cotton up 45 per cent and sugar up 25 per cent, but this raises an old question about chicken and eggs, David Jones, chief market strategist at Capital.com, says.
“Is inflation driving commodity prices, or are commodity prices driving inflation?”
The more pressing question for private investors is this. Can it continue? “If you take the central banks’ view that inflation is likely to be transitory, then a buyer of commodities now risks getting involved near the end of the current cycle,” Mr Jones says.
However, if you think inflation will persist – and the latest shock US inflation figure suggests it will – Mr Jones reckons upping your commodity exposure could boost returns and hedge your portfolio.
“Just don’t take for granted that the great run we have seen this year is a surefire bet,” he says.

2021-08-20 - After a volatile week in many markets, the question many investors and traders may be asking themselves is whether they have overestimated the strength of the economic recovery. The price of oil is considered a useful barometer for how markets feel about the short-to-medium term future - and this week it slipped to its lowest levels in three months.  It bears mentioning that July saw oil at its highest since late 2018 -  but that does perhaps neatly underline the sharpness of the turnaround during August for crude.

The trading week started with Chinese economic data coming in lower than analysts were expecting.  In addition to this, rising cases of the Delta variant of the coronavirus have also unnerved investors.  

And to top it off, the latest statement from the US Federal Reserve was seen as signalling that it may soon start rowing back on its support for the US economy.

It would be stretching the definition to refer to the preceding events as a ‘triple whammy’ for markets, but perhaps this week revealed possible cracks appearing in what has so far felt like boundless enthusiasm from investors towards risk assets. But, let's try to maintain a sense of perspective here -  it also hit fresh all-time highs this week. It is perhaps somewhat premature to start calling for the next great bear market in equities. 

However, it is fair to say that investors and traders have been somewhat shaken by the various moves of this week and, even if markets rally further, we may  see a more cautious approach when investors return after the summer break.

2021-08-16 - Traders are flocking to gold on European investment trading platform Capital.com. According to the platform’s trading metrics, the number of clients trading derivatives on gold went up by 248% today (on Monday, 16th August 20201) from the previous day.  Over the 24-hour period, the volume of derivatives trades on gold jumped by 787%. 

Before the weekend, gold was the sixth most popular market to trade on the platform. Today, gold is the number one most traded market on Capital.com. The resurgence in gold trading, however, follows close on the heels of a flash crash in gold last week.

David Jones, Chief Market Strategist at high-growth European trading and investing platform, Capital.com:

“Retail trading in gold seems to have made a dramatic comeback today. Gold ended last week under pressure with the price of the yellow metal plunging to around $60 lower, driving gold to a four-month low. For a while, not even the ongoing threat of inflation seemed to be able to help gold investors. Now we are seeing a resurgence from last week’s lows. 

The contrarian approach here may suggest that some traders are convinced that the best time to buy an asset is when nobody else wants to.  It does feel a little like this in the gold market at the moment - although for a sense of perspective, it is still trading above its low point hit in March of this year.

5 August 2021 - Trading derivatives in Robinhood stock (HOOD) was one of the top ten most traded markets on the European trading and investing platform, Capital.com yesterday (4/8/2021). This follows reports that Robinhood had allegedly halted trading of their own stock on their own platform as volumes surged. Chief Market Strategist of Capital.com evaluates why there is a sudden peak in interest for HOOD.

“After a disappointing market debut last week, the online broker Robinhood Markets ended Wednesday trading 50% higher than the day before. Short-term market moves can make little sense at the best of times - and this is just as true for newly listed stocks. Of course, Robinhood has been front and centre this year as the broker of choice of retail investors involved in so-called meme stocks such as GameStop and AMC. The stock price was so volatile on Wednesday that Robinhood allegedly had to stop trading of its own stock, on its own platform.

The company was a hot topic of discussion on Reddit's Wall St Bets forum this week and some are suggesting that this sharp rise is once again down to FOMO - the fear of missing out. This can potentially create real momentum in a market that could last for some time - the meme stocks earlier this year are a good example, as was the strong run for the cryptocurrency sector in May. Alternatively it could be a short-lived spike. But after the disappointing IPO, is Robinhood suddenly worth twice as much as it was last week? This  could be an interesting one to watch but it wouldn't be surprising if those whose "fear of missing out" led them to buy, end up nursing a different sort of regret in the days ahead,” David Jones, Chief Market Strategist at Capital.com.

30 July 2021 -   It was something of a waiting game for traders this week, with all eyes on the monthly US central bank announcement on interest rates - and more importantly any hints that it would unveil the US Federal Reserve’s (Fed) view of the state of the US economy. There was nothing too momentous from the announcement in the end.  It appears that the Fed is going to wait until the economy improves further but the time for tapering its monetary support seems to be getting closer. 

One market that didn't wait for the announcement before sparking into life was cryptocurrencies.  Spurred along by a rumour that Amazon was going to start allowing crypto payments, Bitcoin jumped by 30% over the past week and traded at levels not seen for over a month. So far, these gains have been held onto, despite Amazon stating that the rumour was not true. While volatility is usually welcomed by traders, I am not sure the surge in crypto over the last week has really changed the landscape that much. Following the crash that started in April, Bitcoin has been stuck in a two-month sideways range, capped at around the $42,000 level. If this level gets taken out - and there have been two attempts in recent months that have failed - then perhaps we will go back to the days of the "fear of missing out" trading, and cryptos get exciting once more.

Once the Fed announcement was out of the way, it was business as usual for stock markets. Thursday saw the broad-based S&P500 push out yet again to fresh all-time highs. In line with a wider trend we have seen for most of the month,  after a  brief sell-off, traders  took yet another opportunity to buy the dip and move out to record levels. It is said that bull markets climb a wall of worry with investors expecting a possible crash to be just around the corner. No market goes up forever but US stocks, for now at least, look like they could possibly keep their momentum as the month comes to an end. 

Weakness in the US dollar lifted other markets after the Fed announcement. The pound hit its best levels in more than a month and even gold caught some momentum with US dollar weakness and the threat of increased inflation providing some traders with a couple of reasons to buy in. But I would not write off the US dollar just yet. The dollar index - the greenback against a basket of world currencies - is still up year-to-date and if inflation continues to be a concern or  stocks start to lose some of their shine, we could potentially see it swing back into favour as a safe haven destination.

2021-07-01 - Although June finished off calmer than some of the market excitement in the middle of the month may have led us to expect, inflation was still a nagging concern for investors. Central bankers have continued to try and soothe any worries about the rise in the cost of living. The Bank of England governor, Andrew Bailey, is the latest, saying that any acceleration in inflation this year would likely be temporary and was just a short-term fallout from the Covid bounce-back.  It remains to be seen how temporary it ends up being, but it's fair to say that markets shrugged off the mid-June wobble and it was seemingly business as usual.

In the US, the broad based S&P500 and tech-biased NASDAQ indices pushed to fresh all-time highs as the month finished. The S&P is now up a staggering 95% since the March 2020 low.  It is said that bull markets climb a wall of worry, but at the moment investors seem happy to keep buying the dips, pushing stocks out to ever-dizzying heights. 

Perhaps of more concern is the direction of the crude oil market. This week, we saw another multi-year high for crude, hitting its best levels since October 2018.  If we see ongoing strength in oil, this is one thing that could keep the rise in inflation anything but temporary, and may give central bankers a real headache in the second half of this year.  

Meanwhile, the news from Gap that it was closing its UK and Ireland stores was not a major surprise, and in early trade the shares were up slightly.  The company's stock recently hit its best levels in more than five years, so this critical overhaul of its business seems to be well received so far, by investors at least - but it does suggest that they won't be the last high street big name to undertake such a shake-up.

2021-06-27 - Despite  - or perhaps, because of - the beating that cryptocurrencies took last week,  it has still proven to be the most popular asset class this week with our traders. If the last few years have taught us anything about the trading psychology of the crypto faithful, it's that a mere 50% collapse cannot dent their enthusiasm.  There has been more stability in the likes of Bitcoin this week, which so far has been building a base above $30,000.  While many fingers may have been burnt over the past couple of weeks, those who have been sidelined during the past few months are seeing this as an opportunity to get in on the cheap.  Only time will tell how wise a decision that ends up being. 

More traditional markets that have caught the interest of investors this week include crude oil, with something of a tug-of-war going on at the moment between buyers and sellers. If we cast our minds back to just over a year ago, May futures contract for oil famously traded negative for the first time ever, with the market effectively paying almost $40 a barrel to take oil off its hands. This week has seen crude back near its highs for the year so far, trading above $66.  There is quite the split in sentiment between clients.  Some expect that further economic recovery will see the price continue to soar, whilst others are betting on a price slide if US sanctions against Iran are eased and it starts supplying the world market once more. 

Among individual shares, Tesla remains a popular one with our traders.  The electric vehicle company has not had the best few months, with its share price in reverse from January’s all time highs. The stock was down almost 40% from the $900 level it achieved in early in 2021 but plenty of clients are viewing this as a potential bargain price and have been picking up the stock. Perhaps with the recent Bitcoin burn-out, Tesla boss Elon Musk will tweet less about crypto and more about his own business - which may help to reassure investors.

24 June 2021 - It has been a calmer week in markets following the interest rate-inspired fireworks we had at the end of last week. In fact, it has been business as usual for many major assets.  Crude oil pushed higher again, trading briefly above $74 to set its best levels since October 2018. Both the US and NASDAQ stock market indices hit fresh all-time highs, shrugging off the volatility seen last Thursday and Friday where the threat of rates rising sooner rather than later sent investors heading for the exit. 

Perhaps oil is the maket to watch in the weeks ahead and will give us a hint as to whether investors' nerves are starting to crack.  There already seems to be a lot of that crude will hit $100 per barrel , which, let's not forget, famously traded negative in April 2020.  When even the pessimists are starting to join the bulls, that's precisely the time to start wondering if perhaps the incredible recovery we've seen across many asset classes has gone far enough.  But for now, not much appears capable of denting investors' enthusiasm for risk. 

It is at times like this of course that markets could be thought to be the most vulnerable - and investors become over-complacent, as riskier assets bounce back from various mini-panics. But for now traders are happy to step in and buy the dip.  

The spectre of inflation is still out there, with the Bank of England (BoE) adding its voice to the chorus of central bankers aware of the risk of rising prices, but not overly concerned. UK inflation is at a 2 year high but, like its American counterpart, the BoE expects any move higher to be just temporary.  It remains to be seen whether this central bank sang-froid comes back to bite these venerable institutions later in the year. Meanwhile, the crypto faithful felt more pain this week as Bitcoin dipped briefly below $30,000 - but even that was seen as something of an early summer sale and, so far at least, it has managed to bounce-back by more than 10% in a matter of days.