Stock-Market Selloff Largely Profit Driven, No Early Indicator of Major Recession Coming_ Financial

Joining us now to discuss the latest in a global stock market stock markets is FX Street senior analyst Joseph Trevisani Welcome Joseph. Good to have you with us. How concerning is today's sell-off? Well, we have economic concerns impacting a very overbought stock market around the world we had a tech trouble here in the United States and Now that people are beginning to worry about whether the u.s. Is headed for a recession We have some statistics that may point in that direction Everybody is heading for the exits on their profits. So that's that the base story and what's going on in equities and What triggered all of this what factors contributed to it? well, if you look at the the the economic systems the Fed pays the most attention to After inflation, of course, it is the job numbers and the job numbers that came out recently were weaker than expected Now the job market has been slowly Declining, but it's still running at a pretty reasonable rate But nevertheless stock markets discount the future and that's what's happening here If the u.s. Is headed towards a slowdown or a recession Then at the time to get out of your long positions in equities, especially since all the equity averages hit all-time highs very recently Now is the time on top of that you have the Fed not just hinting but pretty much saying That they're going to cut rates in September Well markets going to look at that and say what does the Fed know that we don't so all of these factors together Have put people on the defensive about stocks and as I said, they're taking profits on very high equity averages Now a lot of speculation there and you know, as you mentioned, it's a very uncertain time The government says it's following the developments, but is there anything that can or should be done? well, we know what the Fed is going to do the Fed's going to cut rates the Jerome Powell and the Fed in general do not like to surprise markets and when they do the markets really panic So the the Fed and mr. Powell have set the stage for this at the last meeting Making it very clear that a rate cut is coming now if you look at the overall equity the overall statistics in the United States None of them would normally Indicate that we have a recession coming. We have to see a slowdown Nonetheless, the Fed is being proactive on this. My guess is they will cut rates in September and that's not a very very Outrageous statement they will cut rates. All right, and why do you think this sell-off is happening today specifically though? Well, it's happening specifically because the Japanese market has led the way Japan is a special case What's happening in Japan? Japan has an export-led economy That's where much of their GDP comes from at least of the extra portion so there has been because the BOJ has had very low rates for a very long time and they recently just hiked their rates twice Surprising the markets you have an unwinding of what's called the carry trade where people borrow in Yen, and then because it's a very low cost and then invest in other currency that has come off very very Rapidly because of the Japanese bank BOJ raising rates the yen has increased in value 12% in the past month well a 12% move in a month is an extraordinary move and it's very Dangerous for the profits of Japan's export-led economy That is why the Nikkei has fallen so hard the Nikkei starts and everybody else follow Now you mentioned earlier people with equities and other assets should see if they can get out of them at this point Is there anything else that people with retirement funds or other investments should do? Well since you know, since we're looking at what I think is a largely profit driven Sell-off that is the US economy does not look to be in very bad shape. There isn't any incipient Indicators that there's a major recession coming that just isn't out there yet. It may develop but isn't there now so if you are looking at a profit driven sell-off then the once those exaggerated Valuations are taken from the market. There should be and there will be Opportunities for purchase if I was giving advice, I would say be careful about selling too much Simply because this may not last if however, we see very serious indications of recession Then you're looking at another further leg down Okay, and and just looking ahead what what specifically should folks be looking for, you know this week in developments on this front What can we expect After you get this major burst of selling which we're seeing right now if the market stabilizes if people come back in I mean you can look at there's an indicator in a Berkshire Hathaway, which now news has come out that it's sold a great deal of stocks in the second quarter Well that cash is Going to be used not just for Berkshire Hathaway But others as well is going to be used to buy stocks at much reduced Valuation if you see that in the next couple of days or the next couple of weeks Then you can be reasonably sure that the markets view is that the profits if you will the excess profits Have been taken out and we're back to an economic valuation. That's what I would be looking Alright great insights. Thank you very much. Joseph Trevisani senior analyst at FX Street great to speak with you Thank you for having me always a pleasure