Hello Everyone, as this Decade comes to a close if you have been in these financial markets we’ve seen unprecedented asset appreciation….and while I don’t see the same returns that we’ve experienced for the past decade we will no doubt see some surprises and strong moments along the way…
This Week’s Sound Bites
• With some of the uncertainties lifted from the markets price action gave us more new all time highs this past week in most US indexes…and although the Russell 2000 made new 2019 Highs it is still yet to rise above the all-time highs made on Sept 3rd 2018…This past week we saw the clear election victory of Boris “Bull Dog” Johnson and the makes of an agreed Phase 1 Deal with China…and keep in mind that while many TV talking heads seem to be focusing on what is being said and not said regarding the deal details, what is more clear is that we will see some uncertainties lifted from the markets…the proposed deal, at a minimum will result in a net swing of $62 Billion in tariffs next year, or about 0.30% of GDP…this is a net positive for the markets and price action…throw on top of this we have an accommodative Central Banks, from the FED, ECB and the BOJ allow the markets to end 2019 in a very strong fashion…
• With the FEDs holding interest rates at bay this past week we are seeing Central Banks and low interest rates have also played a strong role in the market performance for 2019…for most of this year, we have seen the 10 Year Interest rates coming in lower than the standard dividend yield in the S&P…in fact, stats have shown that since 1926 market returns are boosted sharply with the S&P Dividend yield is around the 10 Year US Treasuries…this does change somewhat when 10 Year Rates rise over 2.5% but the forecast for 2020 is for rates to stay very low with the Feds admitting they are on hold while allowing inflation to run hotter than normal before taking any action…we are still seeing the US Balance Sheet increasing in the last few months of 2019 by over $150 Billion and could go higher thru early next year…
• Easy money has also financed the US Oil Shale and Fracking boom as well…cheap money has allows many new technological developments over the past decade in the Oil industry allowing for the US to become this past Sept a net Oil exporter vs importer of Oil…as a result the Global share of Oil production in the US has risen from about 5% to over 20% currently outpacing both Russia and Saudi Arabia…
• Here is another interesting Stat for the S&P…the current RSI (Relative Strength Indicator) is over 70 indicating an overbought situation however, in looking at times when this has occurred going back to 1933 the S&P has averaged a 6.1% gain in the following 26 weeks and an 11.5% increase going out over 52 weeks…the idea being that when the RSI reaches these higher levels it shows strong momentum behind the price gains which has a higher probability of continuing, even with market pullbacks…
Weekly Round-Up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
