Peter Schiff: What the market needs now is imagination
According to media reports, gold has plummeted recently, the U.S. dollar has risen sharply, long-term Treasury bond yields have risen, and U.S. stocks have continued to rise. The catalyst behind market changes is better-than-expected employment reports, and the market is now moving toward an imaginary model, rather than economic reality.
The non-agricultural employment population in the United States in July increased by 943,000 after seasonal adjustment, higher than the expected value of 870,000 and the previous value of 850,000 (the data in June was also revised up from 850,000 to 938,000), and the increase was one year The fastest since. But this is not enough to make gold plummet by more than $100 in two days. If you take a closer look at other economic data, not just employment data, you can find that the data continues to support the weak US dollar and the strong gold price, but the current market has nothing to do with fundamentals. Hype and algorithms determine the main trend.
Peter said that these algorithms are good examples of "garbage in, garbage out." Whenever they get good economic data, they will trigger buying dollars and selling gold, or whenever the Fed talks about the possibility of tightening. Trigger the same action and vice versa. But no one wants to understand the reasons behind these numbers.
In fact, the improvement of economic data is based on the Fed's monetary easing. Consumer credit increased sharply in June. Without the support of ultra-low interest rates, consumers cannot spend without borrowing money. Now that the Fed’s tightening of monetary policy is like the “elephant in the room”, this factor is automatically filtered out when formulating the algorithm.
"In the U.S. market now, 80% of the daily trading volume is done by machines. As a result, corporate profits will not receive enough attention. The same is true for performance prospects. The market will only be based on specific data released daily. To make short-term actions, and this brings'noise'." Guy De Blonay, fund manager of asset management company Jupiter Asset Management, said in an interview.
The daily volume of algorithmic trading will change with changes in market volatility, but in the past few years, the impact of algorithmic trading has become more and more obvious. In 2017, JPMorgan Chase stated that the so-called "fundamental discretionary traders" accounted for only 10% of the stock market's trading volume. Such traders would have an influence on the company's performance and prospects. After making the trade-offs, you will decide whether to buy or sell the stock.
The current market is bound by programmers' code. As long as the trend emerges, it can go on until some powerful external force destroys this trend.
