Its been a generally quiet week, with alot of the data pretty much coming inline with expectations, so no real moves coming from there. The FED announced that it will keep accommodative stance, and this in turn pushed all Indices higher to new record highs, with ES above 1950, DOW approaching 17k, and Nasdaq on its way to 5000. In Europe DAX has settled over 10000, CAC above 4500, but the overall laggard in this whole process is the FTSE 100, which is below 6800 and one of the few markets that isn't trading above its pre crisis all time highs, which was set at the end of 1999!
Now why is this, you can argue a lot of the commodity based stocks haven't done well which has dragged the Ftse down, but in reality, the Economy which showing the most promise, and a shift away from easy bias, and to a more normalized interest rate environments the one that gets punished the most. With strong growth, in manufacturing and service sectors in the UK as well as an improving employment picture, and a over heating housing market has increased the likelihood of a rate rise by the end of the Year, and hence halted the Stock Market advance.
On the other hand the ECB which has negative interest rates with a pledge to cut it further if necessary, and the FED, which maintains it will retain easy bias at least into mid next year, has pushed their respective Stock markets higher and higher.
Moral of the story, the more fragile the economy, the more vulnerable the economy will be to a rate rise, is the Stock Index you need to go long in. This is the way it works in this environment now days!
This lack of volatility and low rate environment doesn't help day traders at all, but then again we the last thing on the mind of central Bankers as they keep feeding this market to go higher and higher. It doesn't look like it will stop, and I think valuations and such things are irrelevant, as countries with mediocre economic numbers, and low rate environment will continue to experiance new high after new high.
On the Fixed Income front, Bonds have pushed up on the back of FED action, and since then has been pretty quiet. With July 4th Holiday around the corner I cant see volumes picking up any time soon, so the most likely outcome will be further grinding up the indexes, and sideways drifting Spreads.
Now why is this, you can argue a lot of the commodity based stocks haven't done well which has dragged the Ftse down, but in reality, the Economy which showing the most promise, and a shift away from easy bias, and to a more normalized interest rate environments the one that gets punished the most. With strong growth, in manufacturing and service sectors in the UK as well as an improving employment picture, and a over heating housing market has increased the likelihood of a rate rise by the end of the Year, and hence halted the Stock Market advance.
On the other hand the ECB which has negative interest rates with a pledge to cut it further if necessary, and the FED, which maintains it will retain easy bias at least into mid next year, has pushed their respective Stock markets higher and higher.
Moral of the story, the more fragile the economy, the more vulnerable the economy will be to a rate rise, is the Stock Index you need to go long in. This is the way it works in this environment now days!
This lack of volatility and low rate environment doesn't help day traders at all, but then again we the last thing on the mind of central Bankers as they keep feeding this market to go higher and higher. It doesn't look like it will stop, and I think valuations and such things are irrelevant, as countries with mediocre economic numbers, and low rate environment will continue to experiance new high after new high.
On the Fixed Income front, Bonds have pushed up on the back of FED action, and since then has been pretty quiet. With July 4th Holiday around the corner I cant see volumes picking up any time soon, so the most likely outcome will be further grinding up the indexes, and sideways drifting Spreads.