Can’t Wait Till 2017! (last bulletin until 9 January 2017)
Bond markets remain in a state of turmoil following Trump’s victory, the Fed raising rates and optimism over the US economy. Equities were subdued as we move towards the end of month and end of Financial Year. The Dow was up 0.3%.Gold was down 2.9%, UST10 years is now trading around 2.61% and the dollar is the strongest against the Euro since 2003. Commodities were weaker on the day. The USD is strong and this may cause issues for US exporters.
Within this backdrop we still have no indication of any economic policy nor any understanding of what spending initiatives will be vetoed or allowed under the Republican led Congress. Tax cuts are not sufficient to allow such market optimism. Eventually markets will want some details.
It appears as though Trump’s Economic Adviser could be Lawrence Kudlow. For those not familiar with Lawrence, he is a TV personality, some of his ideas are wacky at best and has a checkered history. I am not sure how the markets would take Lawrence as a Chief Economic Adviser, however he will need to announce more credible policies than he does on TV.
For economic watchers the weather could play a key to the fourth quarter company profit announcements. The North east has had some bad weather and so too the mid-west with cold conditions and lots of heavy wet snow. This could lead to goods not being shipped to where they are required and cause distortions in Retailers profits for example. Colder weather should also mean that Retailers sell more cold weather gear.
Bonds continued their slide down in price (up in yield) and two years weakened another 4 or so points to close around 1.27%. The yield curve steepened marginally. Equities continued their rally as they head to the next level of 20,000.
Aussie Market Today.
The US bond market was weak and this trend should continue into the Aussie time zone and also for Aussie bonds. Equities were stronger however with commodities weaker this could weigh on the Aussie equity market so maybe we see a slight rise to a steady market in Australia. Credit was stronger on the day.
With Little news expected into next week and towards the end of year, I expect the markets to be quite and volumes to fall as traders and investors square their books and take holidays.