The Storm has Just Begun

As already explained in our previous articles, it is going to be a period of quite high uncertainty for financial markets, but this time the inner reason needs to be found primary in macroeconomic movements and not in the microeconomic world, which is actually performing remarkably in the US and Europe, but not in China.

From the macroeconomic point of view, several bad news have been influencing the stock markets during the last week: the Yuan Devaluation, even lower oil prices and uncertainty about FED next moves in its last minutes.

Despite the actual macroeconomic conjuncture, economic data released in Europe and US is positive: July has seen a rise of 1.6% in European industrial production, confirming the present trend already highlighted in May and June and US industrial production is performing quite well, going up by 0.6% in July, thanks to the contribution of a fruitful automotive production.

On the European side, Greece is still paralysed and despite a new mortgage agreement with Germany, the prime minister Alexis Tsipras has the intention to quit the government due to a lack of trust with its party. In mid-September we will get to know further developments, but at that time financial markets no more weight too much on Greek issues and have already taken into account an eventually declared default.

The present period is a step into a more stable economic growth, but it will take a while to adjust the present economic issues, before engaging the right gear and prior to that, financial markets will have to purge all the running inefficiencies.

It is quite uncommon that although positive economic signals are relevant, negative economic issues affect so much the financial markets; this could be a sign that somehow there is a wind of change in the air, resulting to correct the financial markets at an earlier stage, than what has been the custom so far.

A likely conclusion can be a more rational oriented mentality and a shift in the common investor way of thinking, but something more conceivable could be positively changing markets and that is the growing influence of algorithmic trading and high-frequency trading in determining the next pattern in financial markets…