March 21, 2018
By Mish Schneider
Someone told me recently that the public has no interest in interest rates.
Besides scoffing at this person’s low-bar view of the public, I am also publicly disagreeing.
Or, let me put it this way-if you represent John and Jane Q. Public and do not think rates are something you should at least have a rudimentary knoweldge about, think again.
They do affect you. And the market.
How do they affect you?
Up until recently, you got what my grandma would call “bubkas” when you put money in the bank.
Now, you will collect some interest. Many will view that as “safe” compared to the stock market.
Secondly, with rates rising and the dollar struggling, the cost of buying a house or refinancing an existing one will hurt you more.
Third, should the cost of goods go higher, then with higher rates and a lower dollar, that will pinch your already flatlined wages.
Now, the dollar may not go down. And the Fed could halt their promise of 2-3 more rate hikes this year.
However, if the trends stay their course, how does this fit in with the bleak market predictions this Year of the Brown Earth Dog?
“The Dog year will bring decline in economic growth and activities leading to longer-term setbacks of the stock market and more economic crises will come up. As there will not be return of fire year until 2025, we expect a long lasting bearish market ahead.” Raymond Lo
Jerome Powell said, “"Inflation on a 12‐month basis is expected to move up in coming months and to stabilize around the committee's 2 percent objective over the medium term."
Furthermore, “the Committee seeks to foster maximum employment and price stability. The economic outlook has strengthened in recent months. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong.”
The immediate reaction to Jerome Powell and the FED resulted in higher gold prices, many lower equity prices, while others held gains but declined from their intraday highs, rising rates and a falling dollar.
Recently, I featured the Euro ETF FXE. That returned to a bullish phase today. So did gold (GLD). The dollar returned to a bearish phase.
Here is a chart of the DB Commodity Tracking Index ETF DBC. The green line is the 200-week moving average.
It broke out today after 6 years of trading under the 200 WMA. I’ve said many times, that the FED should be careful what they wish for regarding inflation.
Therefore, continue to watch the commodities and the dollar carefully.
And remember, the sweet brown earth dog is capable of licking you before it bites you.
**Note-Traveling again-no Daily until the weekend.
S&P 500 (SPY) If this cannot regain 275, could see 265 next. 270 pivotal
Russell 2000 (IWM) Still the best last hope for the bulls. 154.75 support, 156 pivotal and 158 point to clear and close above
Dow (DIA) 250 pivotal area. 242 support.
Nasdaq (QQQ) 166 the 50-DMA it closed very close to.170 resistance-the only index above the 6-month calendar range