The S&P/ ASX200 (ASX: XJO) is up 0.7% in morning trade today on the back of a strong overnight session and week of trading for U.S. share markets after U.S. Fed chair Jerome Powell signalled to markets that it does not expect to lift cash rates again in 2019.
Warren Buffett has been regularly quoted over the last 18 months as saying whether share markets are good value or not today depends largely on the outlook for interest rates.
For example if interest or ‘risk free” rates lift (the US cash rate is currently 2.4%) then markets will demand lower stock valuations to compensate for additional risks around equities.
While if cash or ‘risk free’ rates are held low then growth stocks become more attractive in an otherwise low return financial environment.
The US Fed appears to have stoked a return to an equity bull market this week that also has negative consequences for gold prices and gold miners. T
his is because gold is seen as a ‘flight to safety’ asset or something to buy as a hedge against falling markets.
Today ASX gold miners are dominating the worst performers on the local market, check out the scoreboard below:
- St Barbara Ltd (ASX: SBM) down 30% in relation to a downgrade
- Newcrest Mining Limited (ASX: NCM) down 0.4% to $25.39
- Evolution Ltd (ASX: EVN) down 2% to $3.67
- Saracen Minerals Ltd (ASX: SAR) down 3.1% to $2.79
- Regis Resources Ltd (ASX: RRL) down 3% to $5.26
- Northern Star Resources Ltd (ASX: NST) down 2.8% to $8.75
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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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