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Why No Major Panic in U.S Stock via Moody’s Downgrade?

by with No Comment AMT MarketsAssetsFeatured Highlights

Why No Major Panic in U.S Stock via Moody's Downgrade?

While Asian equity markets opened with initial nervousness yesterday after Friday’s late downgrade of U.S debt by Moody’s to Aa1. The U.S major indices did not respond with panic selling, By the end of yesterday’s trading the Dow30, Nasdaq100 and SP500 turned in rather mundane and positive results. Behavioral sentiment and knowing what experienced investors think remains important for people trying to mirror the actions of larger players while trying to take advantage of potential market action.

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Dow Jones 30 One Year Chart as of 20th May 2025

What was NOT mentioned widely in the press yesterday were the facts that Standard & Poor’s had actually downgraded U.S debt in 2011 from AAA to AA+, also Fitch had been warning of a downgrade the past handful of years and did so in 2023 to AA+. U.S government debt remains a definite burden on the U.S economic outlook, but investment institutions have been discussing the dangers of the 36+ trillion USD deficit for years. Talking about something doesn’t mean it is fixed, but it does mean it has been acknowledged and this is where sentiment comes into play.

Wall Street remains in many respects the only game in town for large global investors looking for quiet steady returns. U.S exceptionalism – or at least the concept that the U.S economy remains a true safe haven compared to other investment vehicles worldwide – continues to spur on a confidence game that sees money pumped into it by global pension funds and long-term investors which seek yields that outpace inflation. It can certainly be argued that this endeavor is not always achieved, but the concept that the ability to grow money faster in equity investments via the likes of index investing compared to letting money sit in a bank is noteworthy. The ability of large institutions to place considerable amounts of money in more speculative pursuits like singular equities in sectors they are interested in like AI and quantum also creates a dimension to outperform benchmark indices., but is riskier.

The USD remains the world’s currency of choice for effective trade and protection against the dangers of volatile Forex. The Trump administration likely wants a weaker USD in order to spur on export from the U.S, but it certainly doesn’t want to see the greenback killed. Nor does the White House want to see U.S Treasury yields balloon too high. Day traders may not have been told to watch yields in the 10 Year U.S Treasuries by their brokers, but it is an open secret that should be used as a barometer for investor sentiment. The signals may not work everyday, but over the long-term if U.S yields on the 10 Year U.S Treasuries are soaring it likely means major U.S equity indices are struggling with anxiety – and when the yields are turning lower it can be expected that U.S equity indices are gaining.

An important piece of the confidence game that speculators should note regarding confidence in U.S markets is that 10 Year U.S Treasury yields yesterday declined, and are now lower than values seen last Friday after the ratings downgrade by Moody’s, and are testing values seen on the 14th of May. Traders should certainly stay alert, but they must remember the U.S investment landscape is resilient and is likely not going to perish suddenly. Investors like most humans tend to be optimistic and believe things will work out with positive results somehow developing. It doesn’t mean stock values will always go up, in fact they can move lower violently periodically, but a long-term vision helps when investing in U.S equities.

There has been no panic in U.S equities and the world continues to look at the SP500, Dow30 and Nasdaq100 as places to position investments. Yes, other spheres exists which can produce greater yields, but this also includes higher risks. International diversification is a solid focal point for investors, and day traders need to understand a complex game is being played. Reacting to every soundbite of developing news probably does more harm to speculators compared to good. A steady approach and conservative risk taking tactics are vital.

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High Level Antics as Trump Battles Institutions over Economy

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

High Level Antics as Trump Battles Institutions over Economy

Late last week Moody’s downgraded U.S debt, and the 10 Year Treasury yields as of this morning are near 4.50%. Yet, the Chicago Volatility Index is around the 17.25 level which is actually a small victory and shows that sentiment has improved quite a bit the past month. Let’s remember the VIX was near 60.50 in early April.

Wall Street had a handful of rather positive trading days too last week. Complexity remains a fixture for investors as they navigate their sentiment which is being generated by a rather stormy mix of perceptions. Day traders continue to face a tough betting environment via trends. The S&P 500 and other stock indices are showing signs of life, but how will they react to the Moody’s downgrade with a full weekend of consideration?

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10 Year U.S Treasury Yields Six Month Chart as of 19 May 2025

Last week’s U.S inflation numbers via CPI and PPI were weaker than expected, which raises the curious and obvious question as to why the Federal Reserve remains overtly cautious and refuses to cut the Federal Funds Rate by 0.25% basis points? Short-term traders still have difficult days ahead and those anticipating a fast and powerful bullish run in equities among the bigger indices need to remain vigilant. Sustained higher price action has likely not arrived quite yet for overly optimistic endeavors.

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S&P 500 Six Month Chart as of 19 May 2025

Let there be no doubt that there is a coming collision between the U.S White House and the Federal Reserve. The high level of yields the U.S Treasuries are accountable for are unsustainable and costly for the economy. President Trump will be in no mood for polite conversation with Fed Chairman Jerome Powell. Now that Trump is back from his Middle East trip he will likely turn his attention to the U.S debt downgrade and blame not only his predecessor in the White House but Powell too. Treasury Secretary Scott Bessent will likely address monetary policy too in the coming days.

The lower costs of WTI Crude Oil seen the past few months is helping fight inflation. As of this morning $61.70 is the vicinity for early trading. The price of energy appears to be within a solid lower range and likely has little ability to raise significantly. If the price of WTI remains under 70.00 USD this will help global inflation remain rather polite.

But this doesn’t take away from the threat of tariff pressures which do remain unknown. However, it can be argued the Federal Reserve is being far too cautious in the interim. Yes, the U.S central bank faces uncertain economic forecasts because of the potential of U.S tariffs hitting manufacturing and consumer prices, but there is a chance also the Trump administration will actually achieve better than anticipated trade agreements.

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EUR/USD Six Month Chart as of 19 May 2025

Gold as of this morning is slightly above $3,200.00 per ounce, which shows that speculators and investors have backed away from the buying power the precious metal created in the third week of April when the $3,500.00 price was challenged. The USD remains in a dog fight against major currencies in Forex as financial institutions look for equilibrium and try to decide if they should gamble on the Fed cutting interest rates in July. The USD has lost value since early April and remains in weaker mid-term territory. However, the EUR/USD has given back a lot of its gains made throughout April, but financial institutions may now look at current levels as viable support and become buyers again.

Day traders remain in a difficult spot. Wagering on daily market gyrations via interpretations of behavioral sentiment is sensible, but the problem is the quickly shifting winds that still remain a danger. Folks participating in the markets should use the 10 Year U.S Treasury yields as a barometer. Having fallen to lows below 4.00% in the first week of April, investors are again demanding more incentives to buy U.S debt, highlighting murky mid-term outlooks.

U.S Manufacturing PMI numbers will be released this week on Thursday, but this will not influence the markets too much. Instead investors will keep their eyes on the White House as media focus turns from Middle East politics to U.S economic policy. While there have been ‘green shoots’ emerging in the SP500, Nasdaq100 and Dow30, traders should keep their leverage at conservative levels if they merely intend on making short-term wagers.

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USD/INR: Higher Move Correlates and Political Shadows Loom

by with No Comment AMT MarketsAssetsFeatured Highlights

USD/INR: Higher Move Correlates and Political Shadows Loom

The USD/INR is near the 82.8150 ratio as of this writing the 9th of August, on the 25th of July the currency pair was near the 81.6500 level momentarily. Upwards movement of the USD/INR did produce price volatility in the last week of July, and on the 1st of August the Forex pair was near the 82.1700 ratio. Another dose of upwards momentum quickly occurred on the first day of August, and by the 2nd the USD/INR was trading around the 82.7650 mark.

From Wednesday of last week the USD/INR has essentially taken on a consolidated framework, speculators who are gambling on the USD/INR and need big movement to occur in order to facilitate profits have likely found the currency pair difficult to manage. Yesterday a high of nearly 82.9500 came within sight briefly, this as global risk adverse conditions arose because of the Moody’s rating agency downgrade of some U.S mid and small size banks regarding their fundamental ‘soundness’ and credit worthiness.

Rising interest rates from the U.S Federal Reserve have made it harder for many U.S banks to conduct their business, and loans have become more expensive for their clients struggling to keep up with the rising payments. Particularly if borrowers have the unfortunate position of holding ‘variable’ loans which cost more when interest rates are going up. This has also affected the housing sector in the U.S and in the U.K, as mortgages have become highly priced due to the Federal Reserve and Bank of England having aggressive interest rate policies which are affecting the cost of new home purchases.

The question USD/INR traders may be asking is what does this have to do with them?

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USD/INR One Month Chart as of 9th of August

The USD/INR Doesn’t Trade in a Vacuum

The USD/INR has risen in value the past two and half weeks as many other major currency pairs have suffered a similar fate. Nervous sentiment abounds in the global markets because financial institutions are wary of what the major central banks will do next. U.S economic data has been mixed recently, but this perspective depends on time frames regarding outlooks.

Short and mid-term viewpoints continue to point to complications regarding growth and inflation expectations and interpretations of U.S data. The ratings downgrade of some U.S banks from Moody’s yesterday, and early last week Fitch’s downgrade of U.S Treasuries all is related. Rating agencies are getting nervous, perhaps because they do not want to be blamed and held liable if the proverbial ‘fluff’ hits the fan over the mid-term. Rating agencies largely ‘missed’ the financial crisis of 2007 in a famously bizarre manner. The sudden emergence of rating agencies warning investors has made the USD stronger as global investors have become risk adverse temporarily. Yes, this might feel illogical, but the USD remains the world’s safe haven.

The USD/INR also certainly trades because of economic conditions affecting its value from within India. The Reserve Bank of India has a large hand in managing values and is known to be rather active regarding interventions. Yet the USD/INR is being ‘allowed’ to continue to trade near all-time highs. This as India’s status as a growing economic power has taken shape in the global financial markets the past year. The India government has not been aggressive regarding its interest rate policy, and has allowed inflation to seep into the domestic economy via a weaker Indian Rupee for a number of complex reasons. Purchasing goods from India abroad and the ability to invest in India by global financial institutions may be more attractive to those holding USD and needing to convert into INR only when the time is necessary.

Politics and the USD/INR Price Level as 2024 Elections Start to Lurk

From a political perspective too, let’s acknowledge a general election will take place in India in April and May of 2024. Economic decisions being made today and for the mid-term are certainly being affected by the ruling Indian government’s outlook and desire to remain in power. Having come off of yesterday’s highs in the USD/INR the currency pair does remain within sight of highs.

The 83.0000 level likely remains a key barometer for the USD/INR and the Reserve Bank of India is likely watching this value carefully. While it seems unlikely the India government wants the USD/INR to trace much higher because of the psychological implications, global risk adverse sentiment are making the higher values of the currency pair sticky. Tomorrow’s inflation data from the U.S will affect Forex and the USD/INR via the Consumer Price Index. Friday the U.S Producer Price Index will be published. A slight rise in the broad CPI results tomorrow is expected, while Friday’s PPI outcome is expected to match last month’s numbers.

If risk adverse trading remains evident today and the USD/INR holds its ground over the next 20 hours, the currency pair could find that its consolidated price movement from the past week suddenly changes. A higher tick in U.S inflation could be enough to cause the USD/INR to challenge the 83.0000 ratio. Speculators who are wagering on the USD/INR are cautioned to be pro-active regarding their risk management the remainder of this week.