Are the markets suffering a massive hangover since the election? Equities have advanced, Treasuries have been crushed since 2001 and the dollar is around decade highs.
Yesterday’s primary narrative was the upcoming OPEC meeting, the changing headlines moved crude. A secondary story is Sunday’s Italian referendum.
What are the odds all markets now consolidate and enter into a period of relative quietness as been the trend for the year? To refresh, equities stumbled in January/February, recovered March/April, retraced May/June and was quiet most of the summer. And then there was November 8.
If the 2016 trend continues, markets may quietly retrace some of its recent gains/losses until mid-January, perhaps until the commencement of fourth quarter earnings season and the inauguration. At that juncture, the direction of all markets may be dictated by the perceived early successes/failures of the Trump administration and data.
Speaking of data, this is a data filled week culminating with the release of November’s employment report. The markets are suggesting a 100% probability of a rate increase in December and around a 65% probability of a “one handle” by early mid-summer.
Last night the foreign markets were mixed. London was down 0.54%, Paris up 0.56% and Frankfurt up 0.04%. China was up 0.18%, Japan down 0.27% and Hang Sang down 0.41%.
The Dow should open flat to nominally lower. The 10-year is off 3/32 to yield 2.32%.
Chief Economic Strategist Managing Director
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