Monday, April 12, 2021

Morning Note: The Fed Strives to Weaken the Dollar, And for "Good" Reason

Things I suspect will heat up as we move into the week... Q1 earnings reports will of course garner much attention, however, CPI, retail sales, regional manufacturing surveys and fresh housing data will be keenly focused on as well. 

If "heat up" accurately describes this week's earnings announcements, stocks will like it. If, on the other hand, it too-well describes the economy -- CPI in particular -- well, stocks (trading at valuations that only work when interest rates are historically-low) will likely struggle. Those who trade SP500 options are hedging their bets a bit this morning; the VIX is up 6% as I type. 

Asian equities had a rough night last night, with all but 2 of the 16 markets we track closing lower.

Europe's leaning red this morning as well, with 13 of the 19 bourses we follow trading lower so far.

U.S major averages are also trading down this morning (to mixed degrees): Dow down 75 points (0.22%), SP500 down 0.14%, SP500 Equal Weight down 0.06%, Nasdaq 100 down 0.25%, Nasdaq Comp down 0.42%, Russell 2000 down 0.64%.

The VIX (SP500 implied volatility) is up 5.69%. VXN (Nasdaq 100 i.v.) is flat.

Oil futures are up 2.26%, gold's down 0.38%, silver's down 1.20%, copper futures are down 0.38% and the ag complex is down 0.48%.

The 10-year treasury is down (yield up) and the dollar is down 0.11%.

Led by banks, energy, utilities, materials and financials -- but dragged notably by our non-US equity exposures, as well as uranium miners, India, MP (rare earth minerals), solar and gold miners -- our core mix is off 0.36% to start the session.

How ironic that the central banks of old existed to "preserve the value of the currency", while, clearly, the modern-day U.S. federal reserve strives to do precisely the opposite. And, among other things, given the global state of dollar denominated debt, and their desperate desire to keep bubbles afloat, for good reason...

" 1914 the single most important, indeed overriding, objective of these institutions was to preserve the value of the currency."

--L. Ahamad, Lords of Finance

Have a great day!

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