2017/06/21 Commentary: Equities Excess?
© 2017 ROHR International, Inc. All International rights reserved.
Extended Trend Assessments reserved for Gold and Platinum Subscribers
Commentary: Wednesday, June 21, 2017
Equities Excess?
The US equities have had quite an upside run since Donald Trump’s somewhat surprising presidential victory in last November’s US general election. The central bank liquidity-driven rally had done very well since former Fed Chair Bernanke had taken the lead from NY Senator Chuck Schumer’s entreaty to “get to work Mr. Chairman” during Bernanke’s July 2012 Senate economic testimony. That was a reference to the fact the deadlocked Senate was not going to be able to compromise on any economic stimulus legislation. As the Republican House was opposed to the Barack Obama and Democratic Party continued heavy social spending, things were at an impasse.
As such, it was up to the Fed to continue and even expand its massive liquidity infusion Quantitative Easing (QE) program to prevent a slide back into weakness. The Fed’s action was considered excessive by some in following up on the very much needed post-Crisis March 2009 original QE program and its limited QE2 reinforcing that. Yet expansion into Summer 2012 nominally designated QE3 was considered so expansive by some that they termed it ‘QE Infinity’. This was in part a jest aimed at the Fed Chair having become like a lovable animated feature character, as ‘Buzz Lightyear’ Bernanke took the Fed balance sheet “to infinity and beyond” (a catch phrase from the feature Toy Story.)
Yet as the opening graph shows, the US equities rather liked the flows that derived from all the additional liquidity not being able to earn any ‘risk free return’ with interest rates also being kept down at negligible levels. The S&P 500 generally rallied from down in the 1,300 area after QE3 began in 2012 until it stalled into the 2,100 area by Spring-Summer 2015 prior to some sharp downside reactions. However, even after those reactions ended into early 2016, it still seemed stuck again at generally no better than the 2,100 area prior to the US election. Then there was the Trump election, which triggered all manner of positive expectations on various reform and stimulus prospects.
Yet within that context, it is possible to consider US equities might be overpriced now if the Trump agenda does not manage to get passed into law...
Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. As this is a ‘macro’ assessment, Market Observations remain the same as the past weekend’s update (lower section) of Friday morning’s Commentary: FOMC: All Options Open post, and there is no Extended Trend Assessment in this post.
2017/06/16 Commentary: FOMC: All Options Open
2017/06/16 Commentary: FOMC: All Options Open
© 2017 ROHR International, Inc. All International rights reserved.
Extended Trend Assessments reserved for Gold and Platinum Subscribers
Commentary: Friday, June 16, 2017
FOMC: All Options Open
One only needs to review the first few pages of the BoE Monetary Policy Summary and minutes of the Monetary Policy Committee meeting for reconfirmation of the unique inflation pressures in the UK. While at the last full BoE Inflation Report press conference on May 11th Governor Carney indicated a preference to favor employment over inflation mitigation, today’s 5-3 vote to hold the Bank Rate steady at 0.25% was closer than many had expected in spite of recent higher-than-expected UK inflation. That is another indication of major central bank accommodation withdrawal even as the European Central Bank and Bank of Japan are expected to remain very accommodative.
Yet the Fed’s situation is much different in dealing with still stubbornly weak inflation (like the Euro-zone and Japan) in spite of ostensible (the operative term) improvement in the US and other countries employment picture. (More on that below.) As Chair Yellen once again emphasized in her press conference as well, the Fed remains confident that current sluggish growth is transitory. The FOMC Statement kind of summed it all up, with very little change from the previous indications. Those who are inclined can also review Janet Yellen’s full hour long press conference as well as the revised projections.
The other factor returning after positive influence of AG Sessions’ testimony is President Trump aggressively tweeting once again. Temporarily unsettling for equities at times.
Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. As this is a ‘macro’ assessment, Market Observations remain the same as last Friday morning’s update (lower section) of last Wednesday’s Commentary: Self-Inflicted Wounds are Back post, and there is no Extended Trend Assessment in this post.
Read more...