We realize a lot of the money given to the banks in the early Barack Obama years never made it to Main Street. So the banks and Fed tinkering helped drive the stock market to the stratosphere. One has to realize as we enter the back end of the one year anniversary to the February 2016 bottom the stock market has accomplished all of this without the kind of public participation we’ve seen in the past.
I told you a week ago the markets were at the 618 day window from the May 2015 high in the SPX and it was also the 360 day high from the August 2015 low for whoever bottomed there which also turned out to be the NDX and Dow. If markets were in a sour mood, people seemed to be upset about a rumor circulating the tax cut wouldn’t come until 2018. Markets do not respond to travel bans even if I suspend the socionomic discussion for a minute.
Wall Street looked set to open little changed on Friday as uncertainty about the outcome of the U.S. presidential election continued to weigh on investors' minds. Data showing a strong pace of hiring in October had little impact on stock index futures ahead of the opening.
World stocks, the dollar and oil fell on Wednesday, while safe-haven assets such as gold and the Swiss franc rose as investors were rattled by signs the U.S. presidential race was tightening just days before the vote.
The Federal Reserve and Bank of Japan's actions last week have given a second wind to an alternative investment strategy that relies on cheap money and low market volatility to produce outsized returns. Risk parity trades, which involve borrowing to take long positions in both stocks and bonds, have been favored by some big hedge funds and other institutional investors starved for yield by eight years of record low global interest rates.
The jobs report came in with a good headline number at 255,000. Wall Street went ballistic and even noticed a twinge of euphoria Friday morning. Hold the phone, I’m concerned it isn’t what it seems. You’ve seen me flat out say from time to time I think some fundamental number is a complete fabrication. I think this number is on the level. But I also think they got there by the most creative levels of accounting gimmickry.
Another week, another terror attack. After rising on Thursday, the VIX dropped back again on Friday. Last week I told you the market behaves like a little kid who won’t take all of the news to heart until it becomes personal. The key point here is for everyone to realize what eventually happens when society comes under attack--the stock market comes unglued. Want more proof? Let’s go back 100 years.
Markets have thrown a curve ball, as not only have they recovered from the Brexit losses, but the S&P 500 is on the cusp of a new all-time high. It makes world markets very complex. Who is really driving the bus? The SPX could be at all-time highs but the SSE remains 42% off its 2015 high and only 13% off its January low. The DAX remains light years from the 2015 top while the FTSE has been able to make it to the drop zone from last August where all the trouble really started.