Investors have a light data week ahead with most of the attention going towards the multiple Fed speakers. On the economic front, we have Existing Home Sales and Durable Orders.
Fed Members Speak: This week, we have 5 FOMC members scheduled to give speeches across the country including Fed Chair Janet Yellen. After the first rate hike of 2017, investors will be listening to clues to see when the Fed may be tightening its own balance sheet.
Existing Home Sales: On Wednesday (3/22), Existing Homes Sales is scheduled to report. Investors will be looking to see if the report was affected by the recent rise of mortgage rates. If more people than expected went to lock in rates to beat the interest rate hike that happened last week, we will see housing stocks and home improvement companies potentially increase.
Gold: Last Thursday (3/16), the day after the Fed raised rates; Gold had its best day since Brexit. Even though the Fed raised interest rates, signaling to the world that the US economy is doing great, investors think otherwise. A few hours before the Feds decision, the Atlanta Fed dropped its 1Q GDP to 0.9% from 1.2%, which makes the Feds move a little ironic. Investors will be watching to see if gold can get back to the $1250 level and if additional commentary from FOMC members adversely affects the precious metal.
French Elections: Last Friday (3/17), we saw in the latest French polls that the Far-right presidential candidate Marine Le Pen jumped one point, which sent the Euro lower against the US Dollar. This is after European Vix had collapsed to record lows. Investors will monitor the latest polls which are impacting European markets and the Euro. If Le pen climbs in the polls, we can expect to see the Euro falls as she calls to throw the Euro out of France. Even with the point jump, according to polls, she is still unlikely to win. But again, how did polls work out in Brexit and the US elections?
Market Correction: HAHAHA. As the market continues higher, investors are starting to wonder if we will see a market correction. A market correction is a reverse movement, usually negative, of at least 10% in a stock or an index. A correction is usually short term and not a bear market or a recession. However, it could be a precursor to one. Since the November election, the S&P 500 is currently up approx. 11% and the Russell 2000 up nearly 16%. Investors are looking for a correction but it seems to not be coming even with the continued run up. In the last 6 weeks, we have seen the VIX decouple from stocks. Vix options call volumes have also collapsed. The S&P and Dow have now gone 108 trading days without a 1% drop. This hasn’t happened in over 20 years. So everything is pointing to a correction, but nothing seems to be able to trigger it. Even with Trump’s ridiculous tweets, nothing really matters.
Trumps’s Budget: President Trump’s budget proposal was unveiled last week with of course bashing from Democrats and Republicans. The increase in militarily spending helped aerospace and defense companies. He is increasing the VA budget, which is highly needed. But unfortunately, Trump will be adding veterans that will need to utilize the group. Besides the military and VA, those increases will be offset by many programs being eliminated. My personal take on some of this: Yes, some of these programs offer certain people some necessary protections such as (Food) Meals on Wheels. And if Trump paid for the secret service security at Trump Tower and at Mar a Lago, it could fund all these programs with plenty to spare. But of course these are not normal times. However, I also imagine that some of these programs Americans are learning about for the first time just learned that they actually exist. What does the US Institute of Peace do? It may as well be called the Derek Zoolander School For Kids Who Can’t Read Good and Want To Do Other Things Good Too. Sesame Street moved to HBO last year so they get private money and not from the tax payers. So Big Bird is not affected by this. If some of these programs can afford lavish salaries for their executives, then they can survive. The NPR President makes $1.2 million. NPR only gets 14% of its budget from the Feds. That can easily be substituted by corporations or private donations. But don’t worry Middle America, Trump isn’t forgetting you. Who do you think is dropping the new bombs with the increase to the military? The Middle American kid that can’t get a job so he joins the army on a promise to see the world.