Markets took a pause Friday. At stake are the markets continuing their nice run or are they starting to stumble. At heart was Friday’s read of the December Quarter GDP. The GDP was a tad slower up 1.9% versus the previous read of 3.5% the than expected and that allowed bonds to rally a couple of points. Equity markets were happy to pause as investors wait for December Quarter results. Companies expected this week include Apple, Amazon, Facebook amongst a plethora of companies due to report shortly. The other reason perhaps for investors was Trump’s extraordinary Executive Order that called for the banning of Muslims from several countries. This order placed in jeopardy a number travelers but also had a major impact on company’s such as Google and its other forms as they scurried to set up teams to work out how they could manage to get staff that have been away on business or holidays back into the country.
The dollar index was weaker, oil staged a minor slump, 10 year treasuries staged a slight recovery and 10 year bunds stalled. For the moments bonds appear to be in a trading range of 2.35% to 2.60% and probably will remain that way until there is a clarification of Trump’s Fiscal policies and how those policies will be funded. The idea of tariffs on Mexico for example will only lead to inflation growth in the US and that probably means the Fed tightens monetary policy in an attempt to slow growth. Everything is currently on a knife edge, and markets really need to know the extent of policy changes and detail.
Aussie Market Today.
With a weaker US equity market and a marginally stronger US Treasury market I expect that bonds will stage a small rally. Equities should retreat on the day and with China closed until the 2nd February the Aussie equity market should be quiet but will remain vulnerable to any selling pressure. I expect credit to remain tight as the hunt for return continues.