Charles Green here, Senior Market Analyst here at Traders Agency.
Here’s today Market Pulse 360.
Market Pulse 360 for July 28, 2023
There were two reasons that the market sold-off yesterday:
(1) the US Government bond auction did not go well: and,
(2) The Bank Of Japan (BOJ) raised its cap on interest rates 0.5% it pays on government bonds.
Bonds are the primary mechanism for funding government deficit spending, and governments around the world compete for investors that buy these bonds. Prices for bonds and the interest rate they pay are inversely related. When the BOJ raised its interest rate, the US 10-year bond auction prices decreased, causing the interest rate to increase to over 4%.
Bonds compete with stocks, and when bond interest rates go up, money moves from stocks to bonds. This all happened at 1:00 PM ET Thursday, and this is why the market reversed from a strong opening.
However, a 0.5% BOJ government bond rate is still much less than the 4% US 10-year bond rate, so this was an overreaction.
US stocks are still much more attractive than bond rates around the world. So, this will pass and the market will move back up. We held NASDAQ 14,000 Thursday, as we have for every selloff since the NASDAQ broke through resistance after the CPI Report on July 12th.
Thursday was just one more speed bump in moving ahead, nothing more.
Footnote: this morning the Y/Y Personal Consumption Expenditures (PCE), an inflation indicator the Fed observes, was lower than expected, providing further evidence of the downtrend in inflation.
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A Bit More About Me
My specialty is understanding financial markets and the drivers that influence longer-term direction. I’ve been an active trader focusing primarily on stocks for over 20 years.
I’ve also:
- Been an adjunct finance professor for nearly 20 years
- Worked as a financial consultant with Merrill Lynch managing millions of dollars
- Earned a Master of Science Degree in International Business and Finance from Georgetown University and a Bachelor in Arts Degree in International Studies from George Mason University.
- Spent 14 years as a Marine (I enlisted at age 17) traveling all around the world
My education, work and life experience gives me a broad view of the world, financial markets, and life in general that informs my trading and investment decisions.
My passion is helping others to take advantage of the best market opportunities to achieve their financial goals.
This gives me the greatest satisfaction, and it’s the reason why I continue to teach in the classroom and outside of it today with every activity in which I engage. I believe that I succeed only if clients succeed.
I am a very unlikely success story. And this is only because I believe that anything is possible with the right knowledge, focus, and winning mentality! When you have that, success is just a matter of time.
Charles Green
Senior Market Analyst, Traders Agency
