We had a big week in U.S. economic data…
-PPI Inflation | Tuesday
-CPI Inflation | Wednesday
-Retail Sales | Wednesday
-NY Fed Manufacturing Index | Wednesday
-Jobless Claims | Wednesday
-Philly Fed Manufacturing Index | Wednesday
-Building Permits | Thursday
-Housing Starts | Thursday
-Industrial Production | Thursday
…and with all that, the Dow crossed 40000 this week for the first time in history.
Inflation is one key factor - when the numbers come in less than expected, equity prices move higher. Although there are many uncertainties at the moment globally, the U.S. equity market shows signs of strengthening as consumers data remains fairly positive.
There are some outside indicators that are concerning. Let’s look at some commodities, we’ll start with the metals. Gold is up despite the dollar’s recent strength and with yields following suit. Gold futures have moved above $2,400 as investors have also started purchasing more of the physical commodity too. Silver prices are also moving higher, silver reached $30 for the first time since 2013. These little things tell me that there is still concern and uncertainty in the market and trader’s minds. For investors, professionals or novices, it is always good to diversify portfolios. This should be the mindset especially now in an election year and with geopolitical tensions overseas.
Other commodities give us a different message. Soft commodities have had a strong year which makes traders think that consumers have confidence in the market and that the worst may be behind us. Cocoa, coffee and orange juice have had quite the year.
So if consumer commodities and stocks continue to provide data that shows a strong economy where’s the concern coming from?
History for one, a lot of the “all-time highs” we’re seeing aren’t matching up with outside data and the correlations that were used to. “Good news” is bad for the market and “bad news” is good for the market - leaving many investors confused and uncertain where to invest. The Fed is unsure on what to do with rates and cuts or raises are on hold for now. We’re in a much different era of trading. Investors have information at their fingertips and information that was normally passed from broker to client is now passed in online chat rooms, look at the “Roaring Kitty” for example. The famous video blogger resurfaced this week and GameStop stock rallied, days later we see (GME) down 20%. Sometimes the fundamentals aren’t the main thing moving prices for a stock but strictly volume.
Disclaimer: Past performance is not indicative of future returns. Opinions are my own. Profitable trades are not guaranteed.
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