Submitted by Lance Roberts via RealInvestmentAdvice.com,
For the third time in four weeks, the market was closed on Monday due to a holiday. Not only is this week shortened by a holiday, it is also coinciding with the annual Billionaire’s convention in Davos, Switzerland and the Presidential inauguration on Friday. Increased volatility over the next couple of days will certainly not be surprising.
While traders eagerly await Theresa May's speech set to begin in minutes, even if it was largely leaked last night to minimize "market shocks" and set the stage for a big squeeze in cable which at last check was over 100 pips higher overnight, the big catalyst setting today's risk off mood was the previously noted Trump statement, published overnight by the WSJ, in which Trump called the US currency "too strong", and attacked the Border-Tax Adjustment, expected to boost the value of the USD by as much as 15% should it be implemented.
Over the weekend, Barron's published its annual roundtable in which prominent investors previewed what they expect out of 2017: "a year of seismic shifts for the markets and, quite possibly, the world. Or, as Goldman Sachs strategist Abby Joseph Cohen said at this year’s Barron’s Roundtable, “We are breaking a lot of trends.” As Barron's dubbed it, "this could be the year the movie runs backward: Inflation awakens. Bond yields reboot. Stocks stumble. Active management rules.
Submitted by Lance Roberts via RealInvestmentAdvice.com,
It’s the Fed’s fault.
Over the past several years, the Federal Reserve has forced interest rates lower in an all-out assault on “cash.”
The theory was simple. Make returns on “cash” so low it is forced out of savings account and into risk assets.
It worked.
But here is the problem.
While US markets take the day off for MLK holiday, the rest of the trading world has been busy, perhaps nowhere more so than the sterling which continued its volatile session in advance of May's pre-hard Brexit speech, falling below $1.20 for the first time since October after the Sunday Times said May is ready to withdraw from tariff-free trade with the region in return for the ability to curb immigration and strike commercial deals with other countries.