Kutay is a Banking and Finance MSc graduate at Queen Mary University of London, with previous experience as a proprietary futures trader in London.
Kutay traded futures on technical and fundamental analysis, traded outright multi-assets including indices such as Euro stoxx 50, FTSE 100, S&P 500, Dax, and fixed income markets such as the Bund, Bobl, Schatz, Gilts and Treasuries.
Kutay’s experience has provided him with an understanding of the financial markets. He has also had training in trading currencies and energy commodities such as oil crack spreads. Kutay is currently working at Societe Generale overlooking client fund accounts, and providing middle office services from a prime brokerage perspective.
Kutay Erol shares financial insights to BeComAware members on market stock performance throughout the pandemic, conclusions and future predictions on a possible major market crash in 2021.
“We always live in an uncertain world. What is certain is that the United States will go forward over time.” Warren Buffet.
Time and time again we have seen major events taking place this year and still it seems that there is no stopping the Charging Bull of Wall Street. In the past 9 months we have seen the Dow Jones industrial average hit record highs then significant lows during the Global Pandemic. Now yet again the Dow breaks another record topping 30,000 for the first time with an increase of 60% since February. After all, it seems US Presidential elections are now not so much of an Event when it comes to market moves in 2020.
The Dow Jones Industrial Average (DJIA) is a measure made up of the top 30 companies’ stocks across industries, known as blue-chip stocks, some examples being Apple, Microsoft and Coca-Cola. The main thing to remember about the DJIA is that the price of the index is made up of the combined sum total of stock prices and has no relevance to the size of the company itself. This is called a Price- Weighted Index.
Why is this important?
The main purpose of the DJIA is to indicate the general health of the market and economic condition, as it covers the major industries across the country i.e. tech, healthcare, banking, food and construction.
Traditional financial market movement
Traditionally there are certain moves which are a given in the financial markets, for example we all know that if the federal Rate (U.S)/ Bank of England base rate was to decrease, due to the inverse relationship of price vs interest, then we should see that Bond prices will increase, consumer consumption will increase due to cheaper rate of borrowing, inflation to increase and ultimately economic growth.
Conclusion and Future Speculation
Nearing the final curtain of 2020, we probably have seen the most aggressive stock market rally in history. We mentioned previously that we have seen a 60% increase after the quickest market decline to date in March and new historic highs in DJAI and S&P 500. 2020 has been the year of the non-events, meaning that all standard calendar events such as monthly employment rates, consumer spending levels and non-farm payroll have not made much of a market impact, mainly due to investors pricing in their positions prior. Regardless of good or bad news, we have seen an increase in the stock markets and even unforeseen events such as the oil price crash in March, which stalled the global markets for a few days.
We may predict that we are due a major crash within the near future, possibly in 2021 and it may be due to 3 reasons:
1. With the Covid-19 vaccine now being approved in the UK followed by many other countries that are most likely to follow suit, we expect society go back to normality within 2021. This would mean that government cash injections would also seize or slow down. The impact of the pandemic has left many businesses no choice but to enter administration. Will consumer spending alone be enough to generate enough cash to stimulate the economies?
2. As banking credit lines to businesses fall, we expect a hike in the news flow of more major companies going bust thus witnessing an increase in NPL generation for banks.
3. The FED stopping the USD currency stimulus – buying up the overnight USD SWAP markets.
If we see a weakening USD, this would have a major impact on global markets. Alternatively, we go back to the opening statement and re-quote the legend himself where we can be certain that the United States will go forward over time.