US Stock Market Marks Record Highs

US Stock Market Marks Record Highs

US Stock Market Marks Record Highs

$DIA, $SPY, $QQQ, $VXX

The Big Q: Is the the US stock market rising because too much money is chasing too few opportunities?

The Trump Trade, or investing in stocks in hopes that the President’s policies will boost economic growth, is not the main driver of this market, says economist Mohamed El-Erian.

“This is no longer a Trump Trade. This is somewhere between a reflation trade, but much more importantly a liquidity trade. This is a liquidity-driven market,” he said Wednesday

“I have underestimated the strength of the liquidity injections. Not just from the Fed, but I think the increase in [income] inequality has meant there’s been less consumption and more investing in the market,” he said.

“And the profit share is so high that the companies are putting the money back into the marketplace,” he said.

He warned that global central banks are “distorting markets” and making investors “do things we and they ‘re going to regret,” he said.

Note: The FOMC minutes revealed that Committee members agree that it will soon be appropriate to begin reducing the central bank’s massive balance sheet, and provided a possible straightforward approach to do so. Currently, the Fed is holding the balance sheet steady by reinvesting the principal of maturing securities. But, by the end of the year, the Fed would like to introduce a gradual increase of caps to limit the reinvestment.

Mr. El-Erian said there is a hope in the stock market that the liquidity trade hands off to the reflation trade or betting on investments that would benefit from an increase in inflation and stronger economic growth.

If President Trump’s proposed policies such as tax cuts and deregulation become reality and boost the economy as promised, the reflation trade may take over as the biggest driver of the market, Mr. El-Erian said.

The S&P 500 posted a record high and the CBOE Volatility Index (VIX) 9.99, -0.73, 6.8%) dropped below the 10.00 mark.

Wednesday the US major stock market indexes finished at: DJIA +74.51 at 21012.42, NAS Comp +24.31 at 6163.00, S&P 500 +5.97 at 2404.39

Volume: Trade on the NYSE came in at 948-M/shares exchanged.

  • NAS Comp +14.5% YTD
  • S&P 500 +7.4% YTD
  • DJIA +6.3% YTD
  • Russell 2000 +1.9% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.37) Bullish (0.31) Bullish (0.35) Bullish (0.43)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.15) Neutral (0.04) Bullish (0.31) Neutral (0.08)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.31) Neutral (0.06) Bullish (0.44) Bullish (0.42)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.33) Neutral (-0.19) Bearish (-0.42) Bearish (-0.38)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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