US Equities and Precious Metals, Both Trade Higher TodayThursday February 16, 2017 18:57
Fueled by multiple factors, including statements made by Federal Reserve Chairwoman Janet Yellen and President Donald Trump, today traders witnessed multiple markets moving to higher ground. Most interesting is the fact that these markets typically do not run in tandem. By nature, these asset classes (risk on and risk off) have an intrinsic negative correlation. They tend to move in opposite directions in reaction to the same fundamental events or data report. We have seen this rare occurrence a number of times over the last few months. The question remains as to whether or not these markets will continue to run in the same direction.
It’s Going to be Massive
As only he could frame it, President Trump today reconfirmed his commitment on a tax reform plan. According to President Trump, “We’re doing a massive tax plan”. He went on to say that this plan, “Would be coming in the ‘not-too-distant future.’”
This statement, coupled with extremely solid economic data in the United States, were cited as primary reasons for yet another day in which US equities break records and close at new all-time record highs.
In fact, according to Ryan Vlastlica of MarketWatch, “The stock market is about to deliver its best winning streak in 25 years.” This is based upon the fact that the NASDAQ Index is closing in on one its longest winning streak since 1999.
Although US equities were trading to higher ground prior to the presidential election last year, the pace greatly accelerated immediately following the news that Donald Trump became our 45th president. Since that point, US equities have traded to all-time new record highs on multiple occasions.
However, there is a major caveat. “This is a market benefiting from ‘Trump fairy dust,’ and unfortunately there’s a shelf life for that,” said Alan Gayle, director of asset allocation and senior investment strategist at RidgeWorth Investments.
A Tandem Run
Both the S&P 500 and the Dow Jones gained roughly half of a percent on the day, with the NASDAQ Index gaining .64%. Gold and silver both traded higher today with gold gaining $4.50 (.37%) on the day and silver gaining 4/10 of a percent. It seems that those who believe that US equities will trade higher are possibly hedging their bets.
For those who would like a deeper analysis, I invite you to sign up for a free trial. Simply use the link at the bottom of this report to view this week’s report, or to sign up for a free trial.
Wishing you as always, good trading,