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| US Debt Ceiling - Countdown to Aug. 2nd |
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The markets have been moving according to the evolving talks around the U.S. debt situation for the past several weeks. Obama stating it will be raised has the markets up one day and then quickly realizing the capacity of the number the markets head down.
See the full PDF version of this month's commentary as well as the archive in our Market Info Section.
MARKET ACTION IN JUNE & JULYThe markets have been moving according to the evolving talks around the U.S. debt situation for the past several weeks. Obama stating it will be raised has the markets up one day and then quickly realizing the capacity of the number the markets head down. This see-saw will have some resolve, prior to, or right at the August 2nd deadline. As I was reading Gary Kaltbaum's column this weekend he discussed a common theme among investors. Should they sell everything in case no there isn't a deal? Frankly, who can blame investors after watching the mainstream media trying to scare everyone yet again! As Kaltbaum stated we aren't saying the market is not about to top out and head lower. What is key coming into today, July 26th, is that the market has ignored the dire warnings. In fact, at the start of the day (July 25th), the Nasdaq was within throwing distance of its 2011 high and many other indexes are close behind. The TSX is also playing some decent catch up with commodities gaining traction on the back of a weakening U.S. dollar. So before you start to go out and sell everything, why don’t you take a good look at the market first? Do not let others sway you. The market has been improving as of late. Even the worst areas, such as the financials, have come off their lows, though they remain relatively weak. On the negative side, there should be no doubt that the fundamentals of the market today are much worse than the last time major averages were at these trading levels. We feel a deal will get done, as it seems the U.S. is backed into a corner with no other option! Long Term: Stocks and Commodities Up, U.S. Dollar Down, Bonds DownGil Morales recently summed it up best: we are in the third year of Obama's administration, the year before elections, so the Obama administration does not want to make any unpopular moves, thus will do everything to prevent a financial crisis. Meanwhile the Republicans do not want to get blamed for stonewalling on the debt ceiling issue, which would create a financial crisis of sorts. Thus, both sides will come to a resolution on the debt ceiling matter. The Republicans will get their limited tax hikes and the Democrats will get their limited U.S. spending cuts. Note, spending cuts and tax hikes are deflationary, which is not good for gold, but since the Republicans and Democrats will have to eventually land on common ground, this should be good for gold.Thus, the debt ceiling will be raised and the market knows it so it continues higher, albeit in a sloppy manner, as headline news telegraphs the on-again, off-again settlement on the debt ceiling matter. READ THE FULL NEWSLETTEROther headlines this month:
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