Is 20 your lucky number?
After the Dow Jones Industrial Average spent almost two months making headlines before triggering the 20K benchmark, a new headline hit the wires yesterday with S&P 500 breaching the $20 trillion market cap. In numerology, the number 20 points to constant changes and rising ambitions. For German theologian and mystic, Jacob Boehme, described the number 20 as “belonging to the Devil”,however, for an investor, this number represented more than 9% in returns on U.S. equities since the U.S. elections.
Same factors that pushed U.S. stocks since November 9 are again providing momentum after President Trump promised last week a phenomenal tax plan to be announced soon, but the greenback ignored the equities rally as all market participants will keep an eye on Yellen’s speech later today when she testifies before congress.
The sideway price action in the U.S. dollar for the past three trading days suggests two things, either markets believe that Yellen won’t reveal any new hints, or they’re waiting for a sign to react upon. If she does indicate that the Fed is ready to act as soon as March, we may see a decent rally in U.S. yields that’s going to support the U.S. dollar and probably limit any potential gains in equities.
Micheal Flynn resigns
Michael Flynn, the U.S. national security adviser sudden resignation late yesterday also seems to be impacting financial markets. The dollar declined slightly after the news broke out and Asian equities gave up on earlier gains. Market’s don’t want another source of uncertainty and the big question now is whether Trump’s Russian scandal ends here or it’s just the first domino to fall.
Inflation on the rise
On the data front, China’s producer prices rose more than expected by 6.9% in January to hit its highest levels since August 2011, meanwhile consumer prices also grew at the fastest pace in about 3 years hitting 2.5%. The rise in food prices, energy, and raw materials is spreading across the world, and this will raise many concerns on how longer will major central banks deny the fact that inflation is back.
Germany which also saw inflation on the rise hitting 1.9% in January, reported its second GDP reading which confirmed that the economy grew at its fastest pace since 2011 at a rate of 1.9%, however, the unadjusted data came 0.5% below markets’ forecast at 1.2%.