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Buybacks Down, Optimism Up
The equities market has rallied on the anticipation of the Dow hitting 20,000. The market has looked to push higher since the election as momentum reigns supreme.
Italy Kicks The Can
This week Monte Dei Paschi, the weakest Italian bank, is under renewed scrutiny because it still needs to raise money to recapitalize and get rid of 28 billion Euros in bad loans it has.
Trump Optimism Shown In Markit Index
As the year ends, not much looks to be changing in the markets as volumes decrease and data points become less frequent. The prognosticators have made their picks for another bullish year in 2017 even though stocks are at near record high valuations.
Currency Jenga Game
The game has changed ever since Trump was elected and inflation started to pick up. This is a risky proposition because the system is unstable. It looks stable today because central banks are doing everything in their power to make it look good.
2017 Will Be Like 2016
The optimism about earnings and the economy heading into this year is higher than last year even though the Fed is more cautious. The Fed expected 2.4% growth in 2016. This likely won’t be met looking at the numbers which have come in so far.
Facebook Is Playing Catch-up
Facebook continues to copy other social media apps with its new announcements. If almost every single new feature is a copy of another app, then it makes you wonder how long it can stay on top of the social landscape.
Fed Hawkishness Reverberates
Stocks and the dollar have rallied due to Fed hawkishness. This can’t continue because multinationals’ profits will fall if the dollar rallies. This would make stocks even more expensive than they already are.
Fed Statement Analyzed
The Fed wants to support the economy and the current administration. While the Fed is political in the sense it wants the economy to do well for the administration, it wouldn’t purposely tank the economy as political retribution.
Fed Raises Rates
Today the Fed raised rates by a quarter point. 2018 and 2019 have that quarter point rate hike pulled through, but have no additional rate hikes from what was expected. The long run Fed funds rate estimate increased from 2.9% to 3.0%.
What Can Go Wrong?
The market is hyperbolic in its bullishness which has no basis in anything tangible other than optimism that Trump’s presidency will bring GDP growth and reignite corporate profit growth.
Inflation Could End The EU
Draghi is in favor of extending the bond buying program, but the Germans are against it. This disagreement will cause fireworks which threatens the survival of the EU.
Buying It Forward; For Now
The headline news is all about Dow 20,000 and given all the attention it's receiving you can expect this index of only 30 stocks to hit that mark.
The Budget Deficit Is Dire
America is in a bad situation with this massive budget deficit. In August, the Congressional Budget Office predicted the deficit as a percentage of the GDP would rise from 2.5% to 3.1% in fiscal year 2017.
Selling Hits The Russell But Where Is The Intensity?
The Russell was down more than 1% for the first time since the Presidential election rally. Where is the intensity to the selling and are there any sectors raising red flags?
Skepticism About The Rally
This article has a few reasons why you shouldn’t follow the herd off the cliff as they buy stocks without regards to valuations. While it may seem like the rally will never end, it seemed like the rally in treasuries would last forever as well.
The Bubble Gets Bigger
Today the market extended its gains to extraordinary levels. Goldman Sachs has been behind much of the latest Dow gains as its stock is 6% off its all-time high it set in October of 2007.
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