Does economic data matter at all in the current market?

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SIMON BROWN: I’m chatting with Jameel Ahmad, global chief analyst at GTCFX. Jameel, appreciate the time today. There are a couple of things I want to chat about, but I want to start off with perhaps a sort of big picture.

In terms of market volatility, we’re very much these days a market dominated by headlines and news. Scott Bessent last week [was] going to be buying the 10- and 30-year bonds – that moves the market. Does sort of economic data or even technical price action still play a role these days in this sort of market?

JAMEEL AHMAD: In this current market environment it doesn’t play any role at all. In this market this year – since the unfortunate geopolitical crisis that broke out at the end of February in the Middle East – this volatility which has been phenomenal across multiple asset classes is completely driven by headlines.

And I think, as somebody who’s been in this industry now for well over a decade, coming towards two decades since Covid, this is the first year I’ve known where headlines have driven the market.

We’re not watching fundamental data. Of course, we’re aware. But when you have so much volatility when it comes to geopolitics, any particular economic data release can vary month to month, and not really show a trend, because we don’t know where the world is heading.

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And it’s the same for technical price action. I’m not going to say that we can completely discount these elements, because they’re very important when it comes to investors watching financial markets.

But essentially, yes, everything that’s driving the market this year is actually headline – and it’s one of those elements where sentiments or analysis has played out more than other traditional drivers of volatility and investor behaviour.

Essentially, I don’t see this trend concluding – or even coming towards an end – unless we have a real peace deal when it comes to geopolitics in the Middle East. And I mean a tangible peace deal, not a memorandum of understanding that then gets thrown out of the window and so forth.

SIMON BROWN: I get your point around it, and I like your point there that a proper peace deal is what ends this. Until then there’s so much weird stuff happening out there. Normally, in an inflationary environment with energy prices and US inflation, we’d have a sense of what the Federal Reserve would do.

Right now we sit here, and we have no idea what the Federal Reserve will do. We don’t know. There are so many things that we would normally have thought, ‘that’s going to be the outcome’ – and it’s just no longer the case across so many different areas.

JAMEEL AHMAD: It’s not only that we don’t know what they’re going to do; even they themselves don’t know what they’re going to do!

And if you look at the first opening narrative soundbites that we’ve got from the new Fed chair, I think of the old adage we came to be familiar about with Jerome Powell, the former Fed chair, was that that Federal Reserve was data-dependent.

And this current Fed chair – I would say the charge that he’s leading with is that we’re taking things meeting by meeting.

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That means that even as the world’s leading institution, they’re uncertain about where the world climate is heading, what it means for the economy, what it means for traditional financial markets, investors, and so forth.

So, it’s not only we who are none the wiser; it’s the same when it comes to the central banks. But that means that uncertainty is continuing and we’re going to continue to see volatility.

And I really would highlight here the importance of investor education, because the volatility that we’re seeing is phenomenal. Of course, volatility can come with opportunity – I didn’t mean to rhyme there – but it also comes with risk.

SIMON BROWN: It does come with risk, yes. and that then means at the heart of any sort of short-term trading in particular, but even in a long-term portfolio, it’s around managing that risk. And in the investment world and in the trading world it’s about position size, it’s about knowing your leverage and your gearing.

That is always important, but perhaps more important to your point in this type of volatile and unprecedented market. I hate the word ‘unprecedented’, but it’s true.

JAMEEL AHMAD: It is 100% true. It is unprecedented. These are very volatile market conditions.

To give you an example, we’ve seen swings in the price of gold – up and down 20% since the breakout of this crisis, the geopolitical crisis.

And that’s your traditional safe-haven asset. Look at what’s happened with the Dollar Index and the greenback just over the past trading week. We’re seeing volatility here across all asset classes: gold, commodities, oil, US dollar, foreign exchange.

The only asset class where we’re not seeing such tremendous bouts of volatility at the moment is in Wall Street, which is surprising to some because of the disconnect there from the real economy. But it’s also because investors are completely all-in on AI, and Wall Street corporate earnings season continues to impress.

I think once we see more blue-chip organisations and organisations overall put more investments into AI – I’m still a bit sceptical about it, but nonetheless automation is seen as improving profitability – the shareholder value is there.

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So I think that in some ways, this economic shift that we’re undergoing now when it comes to evolution in tech is kind of playing out in a way that it’s cushioned in a way from very uncertain geopolitics, and it might even put more investor attention into AI. That’s not necessarily a good thing, but we are seeing uncertainty continuing nonetheless on a global level.

SIMON BROWN: I take your point, and I take your point around the AI in particular. Again, great if you’re the shareholder, but perhaps we’re seeing some crazy stuff happening there. I’m thinking particularly what we’ve seen in memory chips in the South Korean market.

But we’ll leave it there. Jameel Ahmad, chief global analyst at GTCFX, I appreciate the time.

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