July 7, 2013
Weekly Market Outlook
By Keith Schneider
"You say you want a revolution
Well, you know
We all want to change the world"
Beatles -1968
As one of the more interesting weeks played out in the world’s political arena it upstaged impressive rallies in the US and Egyptian Equities markets. The strong rally in US Equities on Friday occurred despite rates touching levels not seen since the fall of 2011. The dollar also hit new yearly highs against a basket of currencies and gold tanked, calling into question the potential bottom in the yellow relic.
The elixir of an improving US economy as indicated by a good employment numbers and the rejection of an Islamic mandate in Egypt was the perfectly mixed cocktail. As much of the press called this a military coup or takeover, many see it as a street vote against Islamic control. The state news agency announced that liberal secularist El -Baradei and former head of the International Atomic Energy Agency will become Prime Minister. El Baradei also echoed similar statements this week and he is no western crony, running a-fowl of the Bush Administration when he found no evidence of WMD in Iraq and told the world as such. He also happens to be in good company on that subject, as this also happened to our friend (another persona non grata of the Bush Administration), Ambassador Joe Wilson. The spark that ignited Revolution number 2 in Egypt is certainly a wake-up call to Islamic fundamentalists as well as governments around the world that transparency in the age of social media is unstoppable. What we are witnessing is a sea change where quality of life and economic progress trump ideology. Open societies and economic progress are the mirror image of each other. We don’t expect Islamists to go down easy or simply vanish, but they are simply on the wrong side of history and longer term that bodes well for the markets.
The tug of war between higher rates versus and an improving outlook for the US economy along is playing out in favor of US equities for the moment, but most of the global equities markets are skimming their lows and any additional increase in rates here could kill this rally. The US equities market is also caught in-between two conflicted technical signals, so what is a trader to do? Find out by checking out this week’s Video
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