FINANCIAL STOCKS DOMINATED YESTERDAY

By: Kent Engelke | Capitol Securities

Financial stocks led the markets higher as the reflation trade continues to dominate activity. The averages are now at the highest valuation since 2004 according to Bloomberg, partially the result of economic optimism via the Trump victory. I think it is noteworthy that to date there are no policies implemented much less proposed, only statements of decreased regulation and taxes.

Is the “Mother” of “buy on rumor and sell on fact” trade on hand? What happens if the Trump proposals become stalled, lacking any significant legation, the result of the hyper partisanship in Washington?

Bloomberg writes volume is anemic, thus suggesting this is a convictionless advance, thus suggesting it can be prone to a sharp pull back.

All must remember nothing is ever linear and there will be ebbing and flowing.

Today, FRB Chair Yellen testifies on Capitol Hill. Will her remarks alter the monetary time table? As noted above, the recent advance has been led by the financials predicated upon a strengthening economy and higher interest rates.

How will her remarks be interpreted?

Last night the foreign markets were mixed. London was up 0.07%, Paris up 0.09% and Frankfurt up 0.01%. China was up 0.03%, Japan down 1.13% and Hang Sang down 0.03%.

The Dow should open flat ahead of Yellen’s testimony; a testimony which is expected to be oblique, defined as no one knows the possible implications and ramifications of a Trump presidency which is challenging the established world order of globalism. The 10-year is off 2/32 to yield 2.45%.


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