Countdown to 20,000

Countdown to 20,000

The equity markets in the US rallied today for no other reason than they expect Trumpenomics could push growth through the 3% level and propel the economy to strong growth. On the other side we have the Fed which failing a significant meltdown in financial markets is set to hike rates Wednesday.  The US bonds have rallied slightly ahead of tomorrow’s expected hike in rates.

The US 10 year held at 2.50% as investor demand stabilised the market and closed slightly better at 2.48%. The US 30 year bond saw good demand at today’s auction and the yield curve flattened.  In the wake of the Monte Dei Paschi problem, it appears as though the Bank is about to be recapitalised and Italian Bonds rallied to 1.90% for the 10 year.

The market will be looking post the hike to guidance from the Fed for how many hikes to expect in 2017. In some ways this is an interesting development. To date the Fed has not been able to predict the future nor how many hikes and to believe that this time is different would be a folly. Economists are very poor predictors of economic growth and interest rate movements. The hikes will be determined by the strength of the economy and with no policy indications from Trump predicting the number of hikes and interest rate movements will be a guess. Trump announced that he will fill at least 2 seats on the Fed with his people to further confuse the situation.

Oil was slightly stronger with West Texas Intermediate trading $52.95 however other variants were slightly lower. Nickel rose 1.5% while copper fell.

Aussie Market Today.

The US equity market rallied and the bonds steadied. I expect the Aussie Market to be somewhat similar. Commodities were generally stronger and this augers well for the Aussie equity market. Bonds were better bid at higher levels and this should translate to some demand here.