Bank of America reassured investors that concerns about the market rallying too much before the recent Federal Reserve rate cut are unfounded. Following the Fed's first interest rate cut in years, the S&P 500 hit all-time highs. Rate cuts are typically seen as positive for the stock market, boosting corporate profits by lowering borrowing costs. Historically, the S&P 500 has averaged an 11% gain in the year after a rate cut, with the rally exceeding 20% in non-recessionary periods.
S&P500
SPXUSD (Daily). Over the past year, the index has shown strong performance. According to the bullish channel, the S&P 500 could reach 6,000 this year.
GOLD
Gold surged above $2,600 for the first time, driven by expectations of further US interest rate cuts and rising geopolitical tensions in the Middle East. The 26% rise in gold price this year, the largest annual gain since 2010, reflects its appeal as a safe-haven asset amid conflicts and economic uncertainties. However, analysts warn of a potential correction, noting that ETF inflows remain low, and retail demand in China and India has weakened. Despite this, ongoing geopolitical risks and a weaker dollar could sustain the gold's rally.
XAUUSD (Daily). After breaking through solid resistance, gold reached $2,625 last week. While the price rises, be cautious of a potential deep correction given the long-term upward trend throughout the year. An ideal entry position would be around $2,530.
GBP
The Bank of England (BOE) held interest rates steady on Thursday, following its initial cut in August, while the US Federal Reserve opted for a larger rate cut. The BOE's Monetary Policy Committee voted 8 to 1 to maintain the rate, citing a "gradual approach" to monetary easing due to elevated services inflation. The UK economy expected to grow at 0.3% per quarter in the second half of 2024, shows mixed economic data with services inflation at 5.6% and wage growth cooling to 5.1%. The BOE also announced it would reduce its stock of government bonds by £100 billion over the next year as part of its ongoing quantitative tightening program. The British pound rose 0.72% against the US dollar following these decisions.
GBPUSD (Daily). This pair has consistently formed higher highs. Now, the previous dynamic resistance level has turned into support. A re-entry is planned for around 1.3100.
OIL
US crude oil price rose over 1% last Thursday, recovering after the Federal Reserve’s unexpected half-point rate cut and escalating tensions in the Middle East. West Texas Intermediate crude closed at $71.01 per barrel. The rise came amid US oil stockpile decline and increased geopolitical tensions, especially between Israel and Hezbollah in Lebanon, with concerns over potential Iranian involvement threatening Middle Eastern oil supply disruptions. Analysts warn that further conflict could significantly impact global oil markets.
WTIUSD (Daily). Oil has broken through dynamic support levels and now has the potential to break the resistance at $71.00 per barrel. We are waiting for a close above this level to go Long.
Fullerton Markets Research Team
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