Optimism is a mile high

Optimism is a mile high.

“Optimism is a mile high but an inch deep” that’s the view of John Manley equity strategist for Wells Fargo. This statement rings true as the markets have built a degree of largesse based upon significant tax cuts and infrastructure spend without any policies or how the tax cuts and infrastructure can be implemented and budgeted for. Trumps address on the 28th is supposed to assuage these fears however if he does not then we could be in for a choppy ride.

Otherwise equities staged yet another up day extending the streak of records to 10 for the Dow. Bonds rallied on the Fed outlook with the 10 year treasury now trading around 2.38%. The 2 year treasury is now trading around 1.18%. The bond market appears to be suggesting that growth may not be as strong as expected and that the Fed may be challenged to raise rates three times this year as flagged. The betting for a rate hike in March is falling, however, the interest seems to suggest that May will be the month that the Fed raises rates.

Commodities were stronger on the day. Crude was up about 1.4% to close around $54.35 a barrel. Gold was stronger, base metals were lower. The Vix remains low and this means should the market get nervous there are possibly significant moves.

Aussie Market Today.

The stronger equity market means that the Aussie equity market should continue to mirror the US equity market and rally. Bonds were slightly stronger in the U.S. and that trend should probably continue here. The USD was weaker following the release of the Fed’s Minutes. The Aussie dollar continues to remain stronger against the USD trading around 77.27 cents. Iron ore was flat.