The Market Radar

We anticipate, monitor, and comment on market moving global economic and geopolitical issues.  No dark side brooding, no wanting the world to end, no political rants.  Traders, investors, policymakers, or market observers can’t  afford to ignore us.

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The Dow of the Inaugural and First 100 Days

We quickly put together a table of the return on the Dow Jones Industrials Average after the first 100 days of presidential administrations,  the return on their Inauguration Day, and the return the day before the inaugural going back to William Howard Taft.  We included only newly inaugurated president (first term) and left out those who assumed the office mid-term either through tragedy or scandal.

It is safe to say that no president has, and probably never will,  beat FDR’s performance unless the country experiences a bout of hyperinflation or another depression.   Roosevelt declared a bank holiday as soon as he assumed office and the stock market was closed for several days until Congress could act on legislation.

…The banking system was on the verge of collapse. On March 4, Delaware became the 48th and last state to close its banks. [1] Following his inauguration on March 4, 1933, President Franklin Roosevelt set out to rebuild confidence in the nation’s banking system. On March 6 he declared a four-day banking holiday that kept all banks shut until Congress could act.

…The EBA [Emergency Banking Act]  was one of President Roosevelt’s first projects in the first 100 days of his presidency.

…Within two weeks, Americans had redeposited more than half of the currency that they had squirreled away before the bank suspension. The stock market registered its approval as well. On March 15, 1933, the first day of stock trading after the extended closure of Wall Street, the New York Stock Exchange recorded the largest one-day percentage price increase ever with the Dow Jones Industrial Average gaining 8.26 points to close at 62.10; a gain of 15.34 percent. – Wikipedia

Interestingly, George H.W. Bush first 100 days (approximate trading days)  saw the Dow’s highest return of the modern day presidents.   Thoughts and prayers go out to the President and the former First Lady as they recuperate from their recent illness.  What great people,  full of grace, dignity, and class.

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Why Money Keeps Flowing Out of China – Bloomberg

Published on Jan 18, 2017
The outflow of Chinese capital hasn’t abated in the last few years, as a weak Yuan and slew of other hindrances perpetuate losses. QuickTake Q&A explains how these pressures continue to take a toll on China’s economy.
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TOTD: Who Owns The U.S. Equity Market?

holders-of-u-s-equities_jan18

(TOTD = Table of the Day)

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QOTD: IMF Economic Forecast

There is thus a wider than usual range of upside and downside risks to this forecast. A sustained non-inflationary growth increase, marked by higher labor force participation and significant expansion of the U.S. capital stock and infrastructure, would allow a more moderate pace of interest rate increases in line with the Federal Reserve’s price stability mandate.

On the downside, if a fiscally-driven demand increase collides with more rigid capacity constraints, a steeper path for interest rates will be necessary to contain inflation, the dollar will appreciate sharply, real growth will be lower, budget pressure will increase, and the U.S. current account deficit will widen. – IMF, January 16, 2017

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(QOTD = Quote of the Day)

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Hot To Detect A Lie

how-to-detect-a-lie

Source:  Pinterest

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Securing the Presidential Inauguration – Stratfor

Stratfor Chief Security Officer Fred Burton examines the sophisticated interagency coordination involved in providing security for the approaching inauguration ceremony.
For more analysis, visit: http://www.Stratfor.com

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How Are Those “Crowded Trades” Doing?

We take a look here at what BofA/Merrill Lynch has surveyed as the “most crowded trades” in the market.  Most are taking on water as the crowd is leaning to the same side of the boat.

Big losses for Japanese Yen shorts.   U.S. tech equities and corporate bonds the only trades working this year.  So far.

Generally, but, not always,  it’s  safe to bet against the crowd in the short-term as traders and algos, who are the near term marginal price setters, can’t take the pain as the market moves against them.

What matters is the long-term, however.  Most of these investors surveyed,  our hunch, are not traders.

most-crowded-trades_jan17most-crowded-trades_returns_jan17boat-listing

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What’s Behind the Gold Rally?

Short covering in the bond market.

Don’t believe it?  Check out the chart below.

Gold is up 7.7 percent since the December 15 low the same day the 10-year Treasury yield peaked at 2.60 percent.

Why are Treasuries rallying?   The massive short position in bonds may be spooked that the Trump agenda is going to take longer than expected to be passed and implemented.

The bond market is wrestling with the Trump trade — and could continue to do so until the incoming administration and Congress can provide more details about their programs — particularly tax reform.

Buyers have been piling into Treasurys, sending prices higher and yields lower against a wall of uncertainty. At the same time, there is a giant short position, which can also help send yields lower as investors cover.  – CNBC

Or it could be what seems to be a destabilization of U.S. foreign relations by some of the recent tweets and comments by the incoming President (see here and here and here).

Gold is a hard trade and as we stated in a  post a long-time back the drivers of gold are numerous and can change without notice:

Gold is a weird cat with multiple personalities and more than nine lives.  The yellow metal is up almost $100 since last Friday’s weak U.S. employment report.

At any given time period  gold will assume any one of its multiple personalities based on a fundamental story and trade as:  1) a safe haven;  2) an inflation hedge;  3)  a commodity; 4)  a store of value against central bank balance sheet expansion;  5)  an alternative currency;  6)  central bank reserve currency;  7)  a diversification asset;  8)  an Armageddon hedge;  and/or 9) all of the above. 

Nevertheless, we expect the gold price to move inversely with U.S. interest rates and believe the U.S. bond market is in a bear market.  Though given the large bond short position, we wouldn’t be surprised if it continues to rally a bit more.   That should help gold in the short term.

We’ve been totally wrong on gold recently and thought the price could see triple digits by the inauguration.   In the words of the President-elect:  Wrong!

Keeping it on a tight leash.

Now, you decide.

bond-gold_barchart_jan17

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Reagan-Trump S&P500 Analog

Trump rally holding.  Now outperforming Reagan’s S&P by 3.13 percent after 47 days from election day.   Meaningless in terms of predicting future performance.  But, fun, no?

reagan-v-trump_analog

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