The founding partner of the American Trader Academy, Amr Abdo, said that oil prices rose at the beginning of today’s session, then fell as a result of the increase in US inventories, and gold also rose and then fell once more, ahead of the US Federal Reserve’s decision on interest rates.
Amr Abdo added in an interview with “Al Arabiya”, that the focus now is on safe havens, which are specifically represented in US bondswhich indicates that the current geopolitical crisis will be prolonged, as well as the negative effects accompanying it, the most important of which is the increase in energy prices around the world, and European markets will be affected in the first place, not the United States.
The founding partner of the American Trader Academy explained, “At first, everyone did not believe that these big consequences had occurred as a result of the Russian-Ukrainian crisis, and there was no preparation for it, and when everyone noticed it, there was a strong movement in the prices of agricultural commodities and energy of all kinds,” noting that energy prices were not affected. Strongly from Russian President Vladimir Putin’s statement regarding general mobilization in part, as a result of Europe and America storing much of their energy needs for the coming months, as well as facing some pressures on energy demand, especially since the presence of very large closures in China and pressures on its economy.
Amr Abdo said, that gold as a safe haven competes with the returns of US bonds as a safe haven also with huge returns of 4% for two-year bonds and trending to rise, and 3-year bonds give returns of more than 3%, while owning gold costs 40 basis points, and therefore the difference between the cost of owning Gold and among the yields from bonds that crowd gold as a safe haven and precede it at the present time.
Abdo explained that the two-year bond yield is more sensitive to raising the interest rate and is expected following today’s meeting, to raise it twice before the end of the current year, and it is expected to raise it from 50 to 75 basis points in the next meeting, and raise it by 50 basis points in December, referring to Deutsche Bank’s expectations of the arrival of US interest to 5% by the end of the first half of next year, while Goldman Sachs forecast 4.5%, and therefore the two-year bonds more strongly reflect expectations of an interest rate hike.
The co-founder of the American Trader Academy said that the demand for US bonds is not only because it is a safe haven now, but liquidity has begun to leave US stocks and head to bonds, for two reasons from the first, geopolitical reasons and as a safe haven, and on the other hand, purely investment reasons and these are sufficient reasons for billions of dollars to exit from stocks to US bonds.
He added that the Fed’s decision regarding interest rates will not come as a surprise today, because historically it did not violate expectations if the rate was more than 60%, and currently expectations are 80% to raise interest rates by 75 basis points.
