Football legend Cristiano Ronaldo once said, “There’s no point making predictions…” Well, we’re ignoring that, and predicting what may happen in Q4. After that, we’ll give you the lowdown on market events this week. Let’s go!
We’ve dusted off our financial crystal ball and we’re casting our minds into the near future. Here’s a few things we think may happen in Q4.
The long-awaited recession
This one has been coming for a while, hasn’t it? Unfortunately, we’re way overdue and many analysts believe that the next recession will finally hit land in Q4 — starting in the US.
The US Central Bank is still uncertain about interest rates and inflation, which has made investors (rightly) twitchy. Stocks look a little expensive right now, and valuations seem high, which isn’t aiding the situation.
Q4 usually sees a rally in some form and it’s going to be interesting to see what traders decide to do with that, if it should come. Many may use it not for long-term investment, but to balance their portfolios ahead of the storm that we’re all being told to expect.
We definitely recommend keeping an eye on the Fed this week as there are some important announcements to be made for the near-term. As we all know, these decisions will have repercussions for traders, investors and, well, everyone everywhere!
No pressure, Mr. Powell!
Government energy intervention in Europe
Worries over gas and oil supplies following Russia’s invasion of Ukraine in February have been a core theme of 2022’s story. Energy bills have been rising for households across Europe as a result of restrictions placed on trading with Russia.
Yet, many countries are now scrambling to support their citizens in the face of rising costs — some of whom have seen their monthly bills jump by over 60% (Germany). EUGHH!
The government has announced a relief package worth €200bn, which includes a cap on gas prices for consumers and businesses, running until March 2024.
The country has also drawn up plans to reduce energy consumption, including only heating public buildings to a maximum of 19C, with exceptions for places like hospitals.
In January, the French government forced the state-owned energy provider, EDF, to cap price rises at 4% for a year, at a cost of €8.4bn. The government plans to reduce energy consumption by 10% — with plans even including introducing a speed limit for ski lifts and producing less artificial snow. How specific is that?!
The UK government has brought in a cap on energy unit prices, which means a typical household bill for gas and electricity will be around £2,500 per year. That’s been estimated to potentially cost the government up to £150bn over the next two years.
What this all means for national economies and their currencies is still massively uncertain. We still have no idea how long this situation will last and whether things will get worse before they get better.
A weakening dollar
The USD recently shot up to a 20 year high, reaching equal-footing with the euro and almost reaching parity with GBP.
EUR/USD, 5 years
History teaches us that the dollar usually performs well in times of global misfortune. Like in H2 2008 when the dollar jumped 22%. Or in early 2020, when it climbed 7% as the pandemic kicked-off.
In this specific case, the dollar’s performance is connected to a combo of the 2 other points on our list — investor uncertainty, but not in the US — in Europe. As we said in point 1, investors are worried that what’s happening in Europe may come to the US.
A strong dollar is actually not good for the global economy. It needs to remain competitive and not be so overpriced vs other currencies. So, a gradual cooling of USD prices in Q4 would be a good thing for global trade (a sharp drop due to a recession would not).
What have you got?
How are you feeling about Q4? Do you have any predictions? Let us know at @_contentworks; and please start following us while you’re there!
Top trading events this week
There’s a fair bit going on this week, here’s when and where you need to tune in.
No major events are scheduled.
● AUD — Westpac Consumer Confidence Index (OCT)
● GBP — Employment Change (JUL); Unemployment Rate (AUG)
● GBP — GDP 3-Month Avg (AUG); GDP YoY (AUG)
● USD — PPI MoM (SEP); FOMC Minutes
● EUR — German Inflation Rate YoY Final (SEP)
● CNY — New Yuan Loans (SEP)
● GBP — BoE Credit Conditions Survey
● USD — Core Inflation Rate YoY (SEP); Inflation Rate YoY (SEP)
● CNY — Inflation Rate YoY (SEP)
● USD — Retail Sales MoM (SEP); Michigan Consumer Sentiment Prel (OCT)
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
The Contentworks team