The New Old Experiment

posted Nov 3, 2014, 10:23 AM by Katie Shook

Central Bankers Unite!

What could drive this market toward a number like SPX 2147?  Start with a cocktail of Japanese and European stimulus, add in some geopolitical unrest, and falling oil to strengthen the dollar.  Then wrap yourself up in a nice carry trade with your currency exchange.  Foreign governments can support the bid for US Treasuries while hedge funds can leverage the currency exchange play.  Meanwhile, the stock market continues higher.

If I had to script the rest of the year, I’d guess the SPX continues to be really tough to outperform this year.  The underlying market would likely stay fairly choppy.  But don’t be surprised if volatility — and favorable options pricing — start peeling there way back out of the system again.  Basically, take a look at the page out of the market’s book after last February’s pull-back.  Then explain to me how ‘this time it's different.’  If you can’t, then more than likely the market will just keep doing what it’s doing.  (Because I know some of you were saying back then WE had QE from our own Fed.  But, from my vantage point, it looks like we simply shifted bond demand to foreign entities that need to hedge their own falling currencies).

Daily Digits

Daily Digits 11-3-14

Weekly Estimated Range

ScreenHunter_09 Nov. 03 06.13

IMPORTANT DISCLOSURE INFORMATION Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Littlejohn Financial Services), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Littlejohn Financial Services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional adviser of his/her choosing. Littlejohn Financial Services is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Littlejohn Financial Services' current written disclosure statement discussing our advisory services and fees is available for review upon request.
Comments