The DOW closed 353 points higher yesterday and Asian markets have followed suit this morning, the Nikkei225 posting gains of 362 points and the Han Seng a whopping 632 points ahead of the close
The DOW is on pace for its best performance in June for 80 years, Trump launched his 2020 election campaign, some suggestion that Jerome Powell may be demoted and renewed hope of a trade deal between the US and China all contributed to the move higher.
The move has the hallmarks of ‘buy on the rumour, sell on the fact’ and to a certain extent this played out with the late trades that we posted yesterday benefitting from a pullback on the two of the major indices. I don’t think Trump is a master politician but he knows what works and a booming stock market is likely to see him back for a second term as president.
He has two cards up his sleeve. It is dangerous and some would say to manipulate the FED as much as Trump is suggesting but getting his way and a rate cut will send markets higher. A deal with China at the upcoming G20 meeting will also have the same effect. With a record high in the DOW within touching distance, markets are naturally going to be inclined to touch those levels.
I’m not convinced that Trump will play all his cards at once, the rally yesterday was given added momentum as a short squeeze took effect. I believe that Jerome Powell will take the course of action he deems most appropriate not that determined by Trump.
My call for today, is no rate cut and a market that falls away from these exalted levels