(I’m back in the turret briefly, but my hands are failing me limiting my typing, so this report is shortened.)
There’s a lot of spin (um, lying?) going on with the Fed’s announcement Wednesday. It’s consistent with past comments and runs as follows:
Consumer Confidence has improved—no it hasn’t.
Economic Growth is growing at “moderate” pace—not really unless you consider 1% moderate.
The strong dollar has restricted economic growth—this has been the mantra for past two years, Retail Sales, Industrial Production and so forth remain weak.
Oil prices are rebounding has prices increased—that’s possibly true but the category is still weak.
Employment is expanding as is participation—most new jobs part-time or in the low paying services sectors, this is BS.
Over Seas Economic weakness has little effect on our projections—seriously?
Financial market (stock markets) are doing well fanning the flames to heat up investor confidence—markets are still rallying based on corporate buybacks. One thing to keep in mind is that this creates a lot of debt.
And, so the psychological manipulation goes.
Just remember gold rallied sharply which means a green from the Fed keeping interest rates low.
So, what is the current rally based on? Earnings? No. Better economic data. No. For now it’s zero interest rates forever which allows cheap debt for stock buyback.
That said, you must understand the Yellen doesn’t want to raise rates before the election this fall. This is part of Obama’s legacy after all. If Trump should be elected, she’ll raise interest rates, and if markets decline he’ll get the blame. Petty politics? Sure, that’s the way Washington works.
Below is the heat map from Finviz reflecting those ETF market sectors moving higher (green) and falling (red). Dependent on the day (green) may mean leveraged inverse or leveraged short (red).
Volume was modest and breadth per the WSJ was positive.
Sign up to become a premium member of the ETF Digest and receive more of our detailed charts with actionable alerts.
My bet would be the current market rally was based on inside information some thought, or were told would happen. Frankly it would be naïve to think otherwise. In the case, and as I’ve been saying lo these many months, for this trend to be valid, the news must follow the market’s trend. And so it did this day.
Today’s data, and all the data since January 1st hasn’t been positive. Also earning are estimated to fall sharply. The only mounting evidence of a rally is the ongoing debt fueled corporate buybacks. This is what the Fed has achieved thus far.
Let’s see what happens.
Dave Fry is founder and publisher of ETF Digest and has been covering U.S. and global ETFs since 2001.
Top 50 Investing Blogs.
Top 25 Best ETF Newslettersin 2015.
ETF Digest was awarded one of the most informative ETF websites in the10th Annual Global ETF Awards.
Disclaimer: The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell only any security. Market sectors and related ETF's are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotation's aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com