Markets Rally to End Week in the Black
Wednesday's Rally Pulls Markets Into the BlackAfter an uncertain beginning to the week, a market rally on Wednesday pulled all three major indices out of the red and into the black. The selloff appears to be sparked by a combination of factors, including worries over the Fed and a recent weakness in the Chinese economy, but the rally was all about snapping up deals as they became available.
Things kicked off on Wednesday with another dip, but late-afternoon buying saw the market shoot up by over 600 points, the third-largest gain in real terms that the Dow has ever seen.
The rally continued with a 300-point gain on Thursday in order to send the three major indices into the black for the week. A hold on Friday was enough to keep markets steady and conserve all of the profits that investors saw on Wednesday and Thursday.
Oil Ends the Week Above $45Despite there being no change in the supply dynamic, oil rallied over $45 this week. There was some talk about Saudi Arabia needing to raise funds in order to fight regional wars, but there has been essentially no change in supply and demand. Investors should approach the situation carefully, as the recent surge in prices could dissolve at any time without fundamental changes in the supply and demand dynamic.
If anything, demand is set to fall even further as we head into autumn. Summer demand increases are nearly over, and aside from a few problems with refineries onshore in America, there has been no change in supply. The US is still producing record amounts of oil, and so is OPEC.
At this point on the political side of things, it looks like the deal with Iran that's set to ease sanctions will go through under threat of Presidential veto, so supply could become even more of an issue than it currently is. The market contraction in China, which appears to be based on a real weakness in their economy, could also lower demand for crude.
At the end of the day, this price increase looks to be temporary by all of the metrics on the ground. That's not to say that oil couldn't rise further, but it would be a brittle rally at best. Investors should be wary of this latest energy rally, and if anything they should use it as an opportunity to get out of the Energy sector while the getting is good.
Japanese Markets Surprisingly Steady During China's ImplosionOne big fact that investors should take away from the past two weeks is that Japanese markets are relatively healthy compared to the rest of Asia. They were consistently up in all but the worst of the Chinese implosion, and were faster to recover than Hong Kong was. Although we don't talk too much about investing in foreign markets, there are a few opportunities in Asia right now that America just can't match. Look to Japan's manufacturing sector -- one of the most high-tech in the world -- for profits right now.
Along with automotive, which can be spotty, and their heavy equipment sectors, high-tech manufacturing is one of the most compelling reasons to invest in the Japanese marketplace. Whether you take the plunge or not, it's reassuring to see the Japanese economy remaining stable during China's upheaval.
Japan acts as an anchor for the region, and the yen provides an important investment currency for anyone who wants to diversify away from the US dollar. All in all, it's been a good week for Japanese investors, and a good week for anyone who has a vested interest in the region. The Japanese markets proved themselves sturdy and able to resist a downturn in China.
Published on Aug 29, 2015By Aaron Phillips