We realize a lot of the money given to the banks in the early Barack Obama years never made it to Main Street. So the banks and Fed tinkering helped drive the stock market to the stratosphere. One has to realize as we enter the back end of the one year anniversary to the February 2016 bottom the stock market has accomplished all of this without the kind of public participation we’ve seen in the past.
The U.S. dollar is higher against most major pairs ahead of the Presidents Day long weekend. American economic fundamentals had a strong week, but failed to gain traction given the rise of political risk as Trump's Administration continues to send mixed messages to markets. The stock market and safe havens like gold and the Japanese yen finished higher against the dollar in a very political week.
For right now, most of the sectors look decent. The SOX is a problem and even the oil stocks found a low. Oil recovered and is still a giant roller coaster. Even Europe is improved and the CAC turned back up with an interesting low at 233 hours and a price of 4733. When I started writing on Sunday night I thought it would have a shot at higher pricing.
The first three weeks of the Trump administration had not made much inroads on his pro-growth agenda, favouring instead an "America first" protectionism, which have weakened the U.S. dollar. His comments on Friday put the reflation trade back in focus. A faster pace of economic growth in the U.S. would be accompanied by higher interest rates as the Fed keeps the economy from overheating
The U.S. dollar had another difficult week as it depreciated against most major pairs. Central banks remained on the sidelines as the Bank of Japan, U.S. Federal Reserve and Bank of England all left their monetary policies unchanged awaiting further data. The Reserve Bank of Australia is up next on Monday, Feb. 6 at 10:30 pm EST. It is anticipated the RBA will not make any changes on its February meeting.
I told you a week ago the markets were at the 618 day window from the May 2015 high in the SPX and it was also the 360 day high from the August 2015 low for whoever bottomed there which also turned out to be the NDX and Dow. If markets were in a sour mood, people seemed to be upset about a rumor circulating the tax cut wouldn’t come until 2018. Markets do not respond to travel bans even if I suspend the socionomic discussion for a minute.
You can finally get the milk and cookies. Stuart Varney at Fox Business was thrilled. The Dow finally hit 20,000 during his show. It only took an extra month. The stock market must love the new administration because it waited just long enough for Trump to take credit.
The U.S. dollar is weaker after the Trump administration remained more focused on anti-trade policies than the fiscal stimulus and infrastructure spending that lifted inflation expectations in the United States. The first 100 days of Trump' administration will be crucial.
It’s finally inauguration week and it can’t get here soon enough. The period from Election Day to now has been anything but normal and I think traders would just as soon be done with the transition. Looking at this from a purely business perspective, the new administration brings optimism but concerns they will light the torch on a tariff war.