The FTSE REIT Index continues to make headway following a break above 640 a couple of weeks ago, indicating an upside of 721. The REIT Index’s uptrend is likely to be punctuated by temporary retreats.
The Straits Times Index (STI), which closed at 3,454 points on Sept 6, up 12 points week-on-week, has encountered resistance near the July high of 3,499. Indicators are neutral to positive, but important highs are likely to act as resistance levels. Hence, a breakout may not materialise on the first challenge, which is what current market action appears to be. Instead, the STI is likely to consolidate sideways as the REIT Index moves higher.
Furthermore, the S&P 500 has retreated to 5,503 as at Sept 5, after moving within a whisker of its all-time high of 5,667, which was attained on July 16. The consolidation by the S&P 500 is likely to dampen sentiment for the STI.
Nobel Laureate Joseph Stiglitz says the Fed should deliver a half-point interest rate cut at the upcoming FOMC meeting, CNBC reports. He reckons the Fed has gone too far too fast with monetary tightening.
See also: STI may retreat on strong overbought pressures but REIT Index may break out
However, Carl Weinberg, chief economist at High Frequency Economics, is not expecting a 50 basis point (bp) cut. “It’s going to take a big uptick in initial claims for unemployment insurance, evidence of more layoffs occurring in the economy, and a sharp drop off in hiring,” for the Fed to cut such a large amount, CNBC reports Weinberg saying.
