Market Recap – August 21/17

It was a fairly quiet day in geopolitical terms, with no Trump or Kim Jong-un rhetoric.

The S&P 500 managed to stop the slide from last week, closing up slightly.

The weakest sector was once again the banks, with the SPDR S&P Bank ETF down 6.28% for the year.

While the S&P 500 is up 8.46% so far in 2017, the Russell 2000 Small Cap Index is down 2.4%. Trump’s promise of large corporate tax cuts had boosted small cap stocks since such cuts benefit smaller, US-focused companies. But with all of the turmoil in Washington, investors are becoming much less confident that the Trump administration is going to come through with these promises, so they have been lightening their exposure to small caps, and are focusing more on the larger cap stocks with international exposure.

The Canadian TSX Index continues to suffer due to a stronger $CAN.

In Asia we saw the Shanghai Index open higher, continuing its recovery after the North Korea concerns had pushed those stocks lower.

The Japanese Nikkei continues to suffer as the Yen appreciates, making Japanese exports more expensive for foreign buyers.

In Europe, the German DAX reflects the general struggles of Euro stocks since mid June, which coincides with the Euro’s strong rally.

Gold is making another attempt to break through powerful resistance at the 1280-1307 level. Gold has made a number of runs at this resistance since last July, when it set its recent high at 1367.  Gold closed today at 1296.70, so we will soon see if this time it will be successful.

Looking at currencies, the $US continues its struggle, and is now down 9.95% since the start of the year.

The $CAN is rallying again after being technically very overbought at the start of August. Longer-term we are looking for the $US to regain strength, so Canadians would want to look to convert to $US anytime we see the $CAN over .80.

The Euro continues to be bid higher. Longer-term, we are very bearish on the Euro, and expect that 2018 will see the Euro hit hard.

With all the turmoil in Washington, the Yen has temporarily replaced the $US as the safe-haven currency play for investors. Longer-term, we are bearish on the Yen.

The British Pound caught a bid today, but it remains vulnerable to further weakness.

Stay tuned!