Is Now the Best Time for Profit Taking before Fed’s Meeting Next Week?

On Friday, September 6, 2019, the U.S. Bureau of Labor Statistics released August nonfarm payroll employment data, increased by 130,000 jobs, but missed economists’ forecast at 150,000 jobs. However, the jobless rate still remained at 3.7%, held near a half-century low while average hourly earnings topped forecasts. The number of people employed in the United States hit a record 157,878,000 in August, the 21st record set under the U.S. President Donald Trump.

Still, investors are looking forward to seeing a rate cut again in September by anticipating for another rate cut of 25 basis points to be announced during the Fed meeting on September 17-18. Fed had made the first rate cut in over a decade on July 31, cutting the rate by 0.25%. Sadly, the market did not quite respond to the positive sentiment of the rate cut as much as it should be.

 

Since July 31 until September 6, Dow Jones dipped 0.07%, S&P 500 plunged 0.06% and Nasdaq lost 1.03%. However, Wall Street saw a huge plunge on August 5 after the trade war between the U.S. and China intensified. On the day that the trade war had escalated, Dow Jones and S&P 500 fell about 3% while Nasdaq plunged 3.5%.

Before the rate cut, Dow Jones made a recent height on July 15, which was 1.81% higher than the index on the rate cut date. S&P 500 was 1.50% higher on July 26, and Nasdaq was 1.86% higher on July 26 as well.

SET Index saw a plummet of 1.75% since August 1 – September 6 while plunging the most by 3.92% on August 15. However, SET gained 0.04% since BOT cut interest rate by 0.25% on August 7 until September 6, mostly due to the recent hike from a positive sentiment of the trade war.

According to the recent event, a rate cut may not be a promising sign of positive sentiment for stock markets. After a plummet, most analysts stated that the market already priced in the sentiment of a rate cut before the actual cut, thus, causing a plummet from a selloff after the date.

 

Earlier this morning, Japan had just announced that its second-quarter GDP grew at a slower pace on weaker capital spending to record at 1.3%, missing the estimation of 1.8%.

However, UK monthly GDP growth in July had made a surprise by gaining 0.3% compared to the previous month, beating an estimation of 0.1%, driven by the service sector.

 

According to the data released throughout the year, it is true that the global economy is slowing down, it is true that countries are cutting their GDP forecast, it is true that there is yet to be a promising sign on the trade war, and it is true that the market is on the rise before the previous Fed meeting. SET closed with a 1.16 points or 0.07% gain on September 9, 2019, three days before ECB meeting and a little over a week before Fed’s meeting.