Global Indices Monthly Outlook – September 2017

The stock markets around the world had a difficult time for most of last month but they managed to close the month in a strong manner which should give a lot of hope for the bulls in the stock indexes. For most of the month, the stock markets were driven by the increase and decrease of the risks and the uncertainties and this added to the pressure on the markets and led them lower. But the risks began to recede as the days and weeks progressed which helped the stock markets to recover during the course of the month.

US Stock Indexes Choppy

The US stock markets were choppy for most of the month. While they began the month of August in a pretty strong manner on the back of some strong employment data, as the month wore on, the price action became choppy due to the rise in global risks. North Korea continued to threaten the US with its missile tests and whenever that happens, we see the stock indexes in the US getting a hit and it happened twice last month. The stock markets corrected due to these risks and when they began to subside, the stock markets rose again and this became a periodic phenomenon. Towards the end of the month, the markets recovered as the risks receded and the stock indexes managed to close in a strong manner.

Looking ahead to the month of September, we believe that the next Fed rate hike is not going to be in this year. Already the market gives only a small chance for such a hike but considering the incoming data, we believe that this would not happen this year anyway. With that ruled out, the stock markets are likely to remain buoyant in the upcoming month as the dollar continues to remain weak. The stock indexes are likely to test their all time highs in the coming months.

European Markets Weak

The European stock markets continued to be weak during the month of August. Though the action was choppy, it was clear that the underlying trend was bearish. The primary reason for that was the fact that the tapering of the QE by the ECB is likely to get delayed more and more. Though the ECB has not acknowledged the tapering of the QE anytime soon, the markets and the traders believe that it is likely to begin sometime soon. Draghi also did not seek to allay any of these assumptions in his speech at Jackson Hole which led to even more belief that the tapering would be soon and this led to a deep correction in the Eurozone stock indexes including the DAX, which broke through 12000 briefly, and the FTSE as well. But like the US stock indexes, they managed to recover towards the end of the month and closed the month in a strong manner.

Looking ahead to the month of September, we believe that the European stock indexes would continue to consolidate and range but with a bullish bias this time. The DAX is likely to wait for the outcome of the Germany elections while the FTSE is likely to be weighed down by the Brexit process and its associated uncertainty. But, with the ECB likely to delay the tapering towards the end of the year, we are going to see some happy faces in the stock markets till then and this is likely to keep the indexes buoyant in the upcoming month. We do not expect too much bullishness in the stock markets, though, as the tapering is more or less confirmed and it is only the timing that is likely to change, if any.

Asian Markets Mixed

The Asian stock markets were mixed for the month of August as they seemed to be pretty much directionless for most of the month.The rise in global risks and uncertainties weighed on the markets, like it did on the rest of the markets around the world but they did not seem to be affected as much as the others. The J225 suffered as the North Korean missile tests appeared close to their region and this escalation kept the J225 under pressure. But as the month wore on, the markets seem to get more or less used to the threats from North Korea and the markets in this region began to stabilise.

Looking ahead to the month of September, we expect the Asian markets to be volatile. The holiday period in Japan is also over and many traders and managers are expected to return back to their desks in full force and this is going to guarantee and lot of volume and liquidity. Considering the fact that the global risks have receded for now, the interest rate hike from the Fed likely to be delayed till next year and ECB likely to delay tapering till the end of the year atleast, we believe that the Asian markets would be buoyed for the month of September and the month should stay quite bullish.