The New Shangri-La

July 14, 2013

Weekly Market Outlook

By Keith Schneider

outlook071513Yes, believe it or not, America is back on top. The new economic Shangri-La. The US stock market roared to new all-time highs this week, fueled by a few choice words (like “maybe, not right now”) from Fed Chief Bernanke. In the words of Elizabeth Barrett Browning, How do I love thee? Let me count the ways. Investors are saying the same to US Stocks for the following reasons:

  1. US Dollar is near 3 year Highs.
  2. Interest rates are still low even after the biggest rise in rates in over 50 years.
  3. US Stocks have shrugged off interest rate jitters and closed on new highs.
  4. The US Economy is doing just ok, which is good for the market.
  5. Inflation is tame ( for now) even using non –government manipulated statistics.
  6. We just had the largest monthly budget surplus ever.
  7. The Gold bubble has burst even if we are due for sharp bounce.
  8. US tech stocks such as Amazon, Google, and TSLA are leading the advance and points to American leadership (Space X is another leader but not yet public).
  9. The US will be energy independent in the foreseeable future.
  10. The spark of democracy lives throughout the world which is long term positive for the Global economy.

This is not to say the steady printing of money by central bankers can’t end in misery, but so far things are looking pretty good, aside from some short term froth. Bernanke is playing at the top of his game, and is managing the weaning off low rates masterfully. And the market loves it. However, any additional rapid rise in rates could unhinge the market. Extreme flexibility is needed at this point in time, as we are entering a phase where parabolic run-ups and blow offs often occur. Here is where old fashioned tape reading comes in handy.

In this week we will review US Stock Indexes, rates, gold, and our favorite country ETF.

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