MACRO MORNING NOTE DECEMBER 19, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland
World stocks steadied on Tuesday, after a modest advancement on hype and hope surrounding U.S. tax cuts. By the end of this week, U.S. Congress is set to vote on the tax cuts, as many analysts believe the bill be signed. As we’ve mentioned before, supply-side economics tends to suppress wage growth over the past 40-years, along with the idea deficit spending will not be a sustainable form of growth in an interest rate hike environment.
Most Asia-Pacific stock markets advanced on Tuesday following Wall Street’s hype on tax reform, enabling Australia’s ASX/200 to hit new 10-year highs. Stock markets in Japan and South Korea faded early gains to end on a mix note.
“When the market is this expensive … you’ve got to ask yourself, ‘What’s going to be the earnings driver to push us up from here?” said Chris Weston, chief market strategist at IG Markets.
Over in Hong Kong’s Hang Seng, the index eked out a gain +.70%, while similar gains were seen in mainland equities in China.
On Wednesday, the BOJ will begin a two-day meeting focused on future policy.
We believe Kashkari is entirely
correct, with such a high amount of leverage, any tightening today increases the probability of a future recession. Per Fox Bussiness, Treasury yields rose Monday after San Francisco Fed President John Williams, who will votes on the central bank’s rate-setting committee next year, said the U.S. economy had “very good momentum” and the passage of tax reform hasn’t changed the central bank’s economic forecasts. But Minneapolis Fed chief Neel Kashkari, who voted against rate increases this year, warned Monday that the central bank could raise rates too quickly, driving the U.S. economy into recession.
“The dollar is not excited about tax reform,” said Saxo Bank’s head of FX strategy John Hardy.
“It could just year-end effects but maybe people are just weighing the negatives. Maybe it won’t boost growth that much… and maybe it is going to blow a hole in the fiscal deficit.”
And of course, President Trump had to promote the stock market, as we’ve mentioned before, most Americans don’t own stocks. SNB says thanks for the advertisement.
DOW RISES 5000 POINTS ON THE YEAR FOR THE FIRST TIME EVER – MAKE AMERICA GREAT AGAIN!
— Donald J. Trump (@realDonaldTrump) December 19, 2017
Over in Europe, regional stock markets across the board were widely mixed, despite the tax reform hype. The EUR/USD is strong this morning +.25% probing into the 1.18117 level.
U.S. Market Overview
Major U.S. Indexes
Large, Mid, Small Cap
SPY/VIX Ratio- at extremes
Heavy resistance WTI after death cross spoted
Dollar compresses S2-S1, ready for imbalance
C&I Loans rounding a top