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Financial assets forecast 1 April 2021

2021-04-01

2021-04-01

TOP 5 strategies. Expectations and reality. Forecast as of 01.04.2021Dmitri Demidenko

Since the end of 2020, the situation in the global financial markets has changed significantly. The slow vaccination process and high pandemic rates in Europe have weakened the euro and related currencies. The explosive growth in US Treasury yields has undermined the position of emerging market currencies. At the same time, US stock indices continue to fluctuate near historic highs. It seems that investors sitting on a mountain of cash have not lost their risk appetite. The change of conditions suggests that the strategies that were relevant at the end of last year could have been unprofitable. Is it so? Let’s check it using the TOP-5 strategies for 2021, which I published [at the end of December][1].

The article covers the following subjects:

Eastern European currencies

In January-March, the Czech koruna fell by 3.7%, the Hungarian forint - by 3.9%. The Polish zloty dropped to the lowest level against the US dollar since 2009, having lost about 5.9% of its value over the quarter. This is due to the third wave of COVID-19 in Europe and the flight of investors from the assets of emerging market countries against the backdrop of a rapid rally in Treasury yields. The number of infections per capita in Eastern Europe is the highest among all the coronavirus waves, forcing governments to adhere to hard restrictions and banks and investment companies to reduce their GDP forecasts.

Dynamics of the coronavirus cases in Europe

Source: Nordea Markets.

I believe it is still relevant to hold the shorts on [USDCZK][2], [USDPLN][3], and [USDHUF][4]. In the second-third quarter, due to the acceleration of the vaccination process in the EU and the ratification of the European Recovery fund, the situation may turn upside down.

Platinum (+11%)

After a superb start, when the [XPTUSD][5] price reached $1339 per ounce, the highest level since September 2014, platinum has slowed down. Major producers from South Africa are ramping up production, and the entire sector is under pressure due to a sell-off in the gold market. At the same time, the precious metal showed resistance to the [EURUSD][6] price fall. In my opinion, as soon as the EURUSD bulls are able to go ahead, platinum will try to restore the uptrend. XPT’s prospects are still the most optimistic among the entire sector.

Platinum and [EURUSD][6] dynamics

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Source: Trading Economics.

Oil

In the first quarter, [Brent][7] prices rose by 22%, [WTI][8] - by 23% due to expectations of rapid growth in global demand and the intention of OPEC+ members to adhere to the previous strategy of limiting production. Oil is the most effective instrument in my portfolio and has a good chance of continuing the rally thanks to the positive stance of Saudi Arabia. Riyadh does not intend to increase production until it is sure that the pandemic is defeated.

Dynamics of OPEC oil production

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Source: Bloomberg.

Conflicts between the UK and the EU after Brexit arise systematically, which restrains the growth of the pound and the UK stock indices. Nevertheless, a rapid vaccination rate, a quick opening of the economy, and high deferred demand can contribute to the rally of sterling and the [FTSE 100][9]. It is not worth getting rid of these assets.

[Boeing][10] stock (+19%)

The US company recently signed a contract for the supply of hundreds of aircraft for Southwest Airlines. On March 28, the news pushed up Boeing shares by 2.3%, which was the best gain among any company whose stocks are included in the Dow Jones Index. In general, the stake on mass vaccination, the explosive growth of the US economy, and the Americans’ thirst for travel are working out 100% and will most likely continue to do so.

Thus, the weighted average return on a portfolio of 8 assets in January- March was 8.3% in dollars over the quarter or more than 33% YoY. In April-June, the Canadian dollar and the British pound can be added to this list of assets.

Price chart of BA in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. www.liteforex.com/blog/analysts-opinions/top-five-investment-strategies-for-2021-forecast-as-of-31122020/
  2. my.liteforex.com/trading/chart?symbol=USDCZK&returnUrl=true
  3. my.liteforex.com/trading/chart?symbol=USDPLN&returnUrl=true
  4. my.liteforex.com/trading/chart?symbol=USDHUF&returnUrl=true
  5. my.liteforex.com/trading/chart?symbol=XPTUSD&returnUrl=true
  6. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  7. my.liteforex.com/trading/chart?symbol=UKBrent_n&returnUrl=true
  8. my.liteforex.com/trading/chart?symbol=USCrude_n&returnUrl=true
  9. my.liteforex.com/trading/chart?symbol=FTSE&returnUrl=true
  10. my.liteforex.com/trading/chart?symbol=%23BA&returnUrl=true