Look At These Surprises Happening Around The Globe Right Now
With continued uncertainty in global markets, this is what you need to know about what is happening around the world right now.
Stock Market Bulls Are Euphoric
(King World News) – Here is what Peter Boockvar wrote today as the world awaits the next round of monetary madness: For all the strong dollar widely bullish sentiment, the euro heavy dollar index is all of a sudden at a one month low. I want to highlight today some of the contradictory beliefs and reactions to the moves in the dollar and the now confusing nature of what the economy and markets want from it…
Despite Dollar Strength, CRB Close To Breaking Out
Beginning with markets, the Nikkei overnight quietly closed at just off its lowest level in a month because of the yen bounce, a negative. US interest rates are falling coincident with the dollar decline, a positive. The CRB index never really fell on the strong dollar and is now close to breaking out to the highest level in more than a year. Great for commodity producers but not so good for the inflation story and consumers (gasoline for example is up 20% y/o/y). About 40% of S&P 500 revenue comes from overseas yet the S&P 500 is at a record high, not worried at all about the stronger dollar. Today the dollar is weak and the S&P futures are lower.
On the hoped for tax reform policy of cutting corporate tax rates with half the bill being ‘paid’ for by a border adjustment tax, the movement in the dollar has inherent contradictions as to whether this will work. The border adjustment tax needs a 20% rally in the dollar to offset the 20% tax on imports. Well if the dollar is going to rally 20% why would a US company build a plant in the US for products they would sell overseas if they can build that plant initially overseas. If I’m a US manufacturer and I’m worried about a 20% rally in the dollar from here, I’ll build a plant in Europe to sell to my European customers and an Asian plant for my Asian customers and I can repatriate the profits back at a low rate. The obvious incentive for US manufacturers seems to be only for the products they sell in the US. Please tell me if I’m wrong and not thinking this through properly.