The Party continues

2

The equity markets continue to rally although Gaming and Aircraft were down. Aircraft systems such as Boeing continue to be buffeted by Trumps ongoing criticisms, while Gaming was off because China has limited what a gambler can withdraw in Macau. The allowable amount has been halved and takes effect this Saturday. This change affected Wynn Resorts amongst a number of Gambling Companies and will no doubt have an impact on James Packers resort in Macau.

Records were hit and these records are as a result of optimism over Trump’s ability to raise funds for infrastructure and that Trump’s grand vision can be implemented. Time will tell whether markets have been overly optimistic. Cracks are however appearing. The Koch Brothers have slammed the Trump Tax plan and it will be interesting to see how much influence the Brothers have now with Trump as President.

Bonds were more circumspect today. Bonds were a little weaker in preparation for the Fed’s rate hike next week. Meanwhile surveys are suggesting that the market expects faster and more frequent hikes by the Fed. This means that markets at some point have to look at valuations. Bonds have the potential to trade back towards the norm, that’s about 3% for a UST 10 year, as such the market has a way to go. What this means for the equity market is that the equity valuations look toppish if we don’t have 3-4% GDP growth in the US.

Aussie Market Today.

Equities continue their run and I expect the same for Aussie equities. Commodities were strong, iron ore continues its run and that will also provide gains for the Aussie Equity Market. Aussie iTraxx was a little stronger overnight. I expect credit to tighten or rather be bid on the day. Bonds generally were weaker and this trend should continue into Australia today.

On a positive note t is worth watching the latest battery research results from University of Western Australia. A research team has been working on using vanadium instead of lithium for storing energy. Early results suggest that vanadium is more efficient and could revolutionise battery storage and technology. Should the early results continue this new technology will make alternatives more viable and hasten the demise of coal.

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