I’m having a difficult time figuring out what the markets see, that I don’t.
Yes we have President-elect Donald Trump coming into office in 6 weeks or so. The perception of regulation easing and increased infrastructure spending have many sectors soaring.
But we have other heads of state running for the exits this week: Italy, New Zealand, Bulgaria governments are in flux over these seemingly separate decisions to leave office early.
We also have the fall out of Brexit, Italeave and as always, Greece to deal with in early 2017.
Change and upheaval are not the things that put the Volatility Index near an all-time low and US indices both broad and narrow are hitting all-time highs.
Perceived regulatory rollback is the driver here in the US, but the demise of the euro could be on the table in early 2017, and that’s not in the market at all.
As I have often said the Dow is not the economy and like now, don’t march in lock step.
With ECB head Mario Draghi giving the market a mixed message this morning with further easing through 2017, but reducing the monthly stipend after March, we see the struggles within Europe.
Next week we have Janet Yellen and the Fed raising rates 25 bps, which could take some of the wind out of the markets, but the year-end window dressing for portfolio managers should stem the downward flow until early 2017. Just the same as last year’s market action.