The Economy: Holiday Cheer continues for the 6th week with global financial markets hitting levels of euphoria not seen in years. Donald Trump’s election was supposed to unleash Forces of Darkness that would obliterate life as we know it. Instead, optimism and euphoria have taken hold of financial markets around the world. Even oil markets are screaming higher on production agreements that ignore the OPEC’s history. The Fed ended its meeting and raised interest rates ¼% as expected. The call is that the Age of Central Bankers is drawing to a close with Trump’s fiscal spending to take the lead in pumping up the economy. Global markets have priced-in immediate results for the Trump agenda. As the post-election rally continues to hit new all-time highs, the Shiller cyclically adjusted P/E (CAPE) ratio now stands at 27. This reading is only exceeded by 1929 and 2000. Stocks are getting expensive.
Food for Thought: The Fed tightening unleashed a selloff in financial markets. Stocks tanked; Mortgage rates jumped to the highest in 2 ½ years. In her press conference Fed Chair Yellen indicated that 3 rate hikes were in store for 2017. Markets were expecting 2. Higher mortgage rates will eventually put a damper on real estate. Higher treasury yields will eventually begin to compete with stocks. But one day does not a market make. The Trump rally took taken a breather today but it may continue upwards till the inauguration on January 20, 2017.
Music of the Week: Elvis Presley “Elvis Christmas Album”