ARTICLES

US Economic Boom

12 March 2018 By PDSNET

The current correction on Wall Street has two primary causes:

1. The rise in the level of wages last month which made investors scared of a much more hawkish stance by the US Federal Reserve Bank�s Monetary Policy Committee (MPC), and
2. The fact that the market had just run too hard for too long and some sort of a breathing space was both necessary and healthy.

Consider the chart:  

S&P500 Index December 2017 to March 2018 - Chart by ShareFriend Pro

The S&P500 retraced 10% in just nine trading days. We always thought that was too quick. After all, the previous correction at the end of 2015 and the beginning of 2016 took nearly 7 months to fall by 14%. In addition to that, the US economy was booming � and the stock market always has to reflect what is happening in the economy sooner or later. For those reasons we expected that this correction would be short and sharp rather than protracted. We wrote an article about this correction on 9-2-18 where we said, �We believe that it will be short and sharp� � and that you should treat it as a buying opportunity. And we always expected that the positive news coming out of the US economy would be the trigger that ended this correction. In that same article we said, �we think that, as the positive economic statistics come through, they will shift the sentiment on Wall Street back to positive�. And that is exactly what has happened. The jobs report which came out on Friday (9-3-18) showed that the US economy created a massive 313 000 new jobs in February month � more than 50% above what economists were expecting (200 000). At the same time, the average wage rose by less than expected � calming fears that the MPC would rush to raise interest rates. It was the perfect combination for the stock market and by close the S&P was up 1,74% at 2786,57 � just 3% off its all-time record high (2872,87). You can see early bullish signs in the chart. For example, we now see rising bottoms � always a good sign. And then on Friday we had a �break away gap� where the S&P opened higher than the previous day�s close � creating a gap. Technically this shows that there is strong bullish sentiment. Of course, this does not necessarily mean that the correction is over. But it now seems less and less likely that it will fall further and more and more likely that a new record high will be made within the next few weeks.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:

PDSNET ARTICLES

The Debtors' Book

A BIT OF HISTORY

Many years ago, in 1982 when I started this business (which became “PDSnet”), I ran advertisements in both the Rand Daily Mail (RDM) and in the Star – which were the two most widely read newspapers in Johannesburg at the time. At that time, we were a very small business and had no credit rating at all. Despite this the RDM immediately

WeBuyCars - Results

The financial results of companies show how profitable they are and give a good indication of their share’s risk and potential return. WeBuyCars (WBC) is a recent listing which came to the JSE on the 11^th of April 2024. Unlike other listed motor vehicle companies, it is a company which specialises in the purchase and sale

Choosing Winners

We are often asked how we go about selecting the shares to put on to the Winning Shares List (WSL). Right now, there are 102 shares on the list with 5 having gone down since they were added, 94 are up and 3 are unchanged. On an annualised basis, 24 of them are performing at above 100% per annum.   

As a private investor,

Kore Revisited

Kore (KP2) remains at once the most exciting and most risky investment on our Winning Shares List (WSL) at the moment. We originally added it to the list just over a year ago on 16^th May 2024 at a price of 20c. It subsequently rose to a high of 83c on 3^rd October 2024 and we published an article

Rand Strength 2025

The strength of the rand is both a critical and a complex issue for private investors on the JSE. Our currency is influenced by two primary forces:

1. Our local economy’s prospects
2. The rand’s role as a leading emerging market currency

These, in turn, are

Sibanye Revisited

In these uncertain times, when nobody really knows to what extent Trump will back down on the international trade war which he has initiated, many investors are moving into precious metals as a hedge against the weakness of paper currencies (especially the US dollar) and paper assets like equities and bonds.

The problem

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s