Treasury Yields and Auction Challenges
Economist Warns of Imminent 2025 Stock Market Crash
Market Updates: Modest Gains Amid Economic Concerns
Economist Harry Dent predicts a significant stock market crash in 2025, potentially worse than the Great Financial Crisis. Dent, a Harvard Business School alum, believes the market is in the "bubble of all bubbles," inflated by overly loose monetary and fiscal policies over the past decade. He warns that the S&P 500 could lose up to 86% of its value, while the Nasdaq Composite could drop by 92%. Key stocks like Nvidia might plummet by 98%, indicating a multi-trillion dollar market collapse.
According to Dent, this bubble has been forming for 14 years, longer than typical bubbles which usually last five to six years before bursting. The extensive stimulus since 2008, estimated at around $27 trillion, and ultra-low interest rates have significantly inflated asset prices. Dent foresees a crash starting early to mid-next year, driven by the Fed's rapid monetary policy tightening aimed at controlling inflation.
"It's been stretched higher for longer, so you have to expect a bigger crash than we got in 2008 and 2009," Dent said. "This is really the second tech bubble version," he added, referring to the dot-com bubble in the 2000s. He believes the bubble's longevity is due to markets being flooded with stimulus since the 2008 downturn, benefitting from accumulated budget deficits and significant cash printing.
Market Updates: Modest Gains Amid Economic Concerns
On Monday, the S&P 500 and Nasdaq experienced slight gains as Treasury yields and the dollar rose. Stocks edged higher despite Friday's strong jobs report, which reduced hopes for a Federal Reserve interest rate cut this year. The U.S. economy added about 272,000 jobs in May, surpassing analysts’ forecasts of 185,000. The unemployment rate inched up to 4% from 3.8%.
The Fed's latest decision is expected on Wednesday, coinciding with new consumer price index data. Traders now anticipate a rate cut in September at the earliest, according to the CME FedWatch tool. While inflation has remained sticky and growth hasn’t cooled much, traders earlier this year had hoped for rate cuts by now. The FedWatch tool indicates traders see only a 54% chance of a rate cut in September, down from 70% before the jobs data.
European Shares React to U.S. Jobs Data
European shares fell on Friday, driven by worries that the Federal Reserve would not cut interest rates soon. The continent-wide STOXX 600 closed 0.2% lower but recorded its first weekly gain in three weeks. Rate-sensitive sectors like real estate and utilities led the decline after the stronger-than-anticipated U.S. jobs report fanned concerns about prolonged high interest rates.
Tech View (Nifty)
The Indian stock market index, Nifty, ended Friday’s session higher by 469 points, forming a long bull candle on the daily chart at 23,290 points. The short-term trend remains positive, with Nifty near an all-time high. Having reached the overhead resistance of around 23,300-23,400 levels, there is a possibility of a minor dip in the market from recent highs, potentially creating a buying opportunity. Immediate support is at 22,900 levels, according to Nagaraj Shetti of HDFC Securities.
Stocks with Bullish Bias
The Moving Average Convergence Divergence (MACD) indicator showed bullish trade for Avanti Feeds, Mastek, L&T Finance, Ramco Cement, Brigade Enterprises, and Wipro. When the MACD crosses above the signal line, it indicates a bullish signal for traded securities or indices.
Treasury Yields and Auction Challenges
Treasury yields peaked on Monday after a weak demand for U.S. government debt ahead of the key inflation report. A three-year Treasury note auction yielded 4.659%, higher than the pre-bidding yield and above the six-auction average of 4.362%. Higher auction yields typically indicate weak demand, as the government must offer higher returns to sell its debt.
Anticipation of Apple’s WWDC 2024
Investors are closely monitoring news from Apple's Worldwide Developers Conference (WWDC) 2024. The event is expected to showcase advancements in GPT AI, Siri, and VisionPro’s global rollout, highlighting the company’s commitment to innovation and enhanced user experiences.
Formation of Texas Stock Exchange
Wall Street’s largest fund managers, including BlackRock Inc. and Citadel Securities, are reportedly planning to challenge the dominance of the New York Stock Exchange and Nasdaq by developing a new national stock exchange in Texas. The “Texas Stock Exchange” has reportedly secured $120 million in funding from individuals and large investment firms.
Conclusion
Overall, the U.S. job data had a significant impact on global markets, with investors closely monitoring the Federal Reserve’s actions. With the potential for a major market correction as predicted by Harry Dent and the ongoing economic concerns, market participants should stay vigilant and informed about these developments as they may influence market trends in the short term.