Since The Fed decided unanimously to hike rates in mid-December, bonds, banks, and bullion are best but the broad stock market is lower. The key area of today's minutes was on the impact of Trump's policy agenda (which was the focus of Yellen's press conference), and they did note that there were "upside growth risks from fiscal policy" and this might mean Fed "needs to raise rates faster."
"Looking back over eight centuries of data, I find that the 2016 bull market was indeed one of the largest ever recorded. History suggests this reversal will be driven by inflation fundamentals, and leave investors worse off than the 1994 “bond massacre”."
Following another day of upbeat economic data, with growing signs that inflation on both sides of the Atlantic is accelerating, investors rediscovered their faith in the Trumpflation rally, pushing global stocks and US equity futures higher, fuelling a second day of 2017 equity gains ahead of today's release of the Fed's December minutes.
Rumors of the Trumpflation rally's death have been greatly exagerated, and not only is the Dow 20,000 back on the radar, following a 124 point surge in Dow futures, bringing the "key psychological level" back within 100 points, but European stocks rose for a third day and entered a bull market, rising 20% from theor lows set last February, following strong Chinese manufacturing and services PMI data.
According to the latest daily fixing of the Treasury Market Association, as a result of the PBOC's massive liquidity drain which soaked up a nearly a third of a trillion Yuan in the past two weeks, the interbank market is freezing again as follows:
Huge market euphoria in the absence of economic improvement, promised tax changes giving rally winners reason to wait to take profits until 2017, Obama scorching the earth everywhere, and numerous other forces mean the stock rally is going down.
As we have detailed numerous times recently, the recent move in Bitcoin has been strongly suggesting increasing fears of capital controls and/or expectations of a looming (and quite notable) devaluation of the Yuan against the US Dollar. Tonight saw China's largest nationalist tabloid suggesting that China should consider one-off yuan devaluation to keep the currency stable at equilibrium level. Offshore Yuan is tumbling - to new record lows.
"The biggest experiment in central bank history ($11 trillion and counting as of November 2016) helped employment recover in the US and UK, and more recently in Europe and Japan. Across all regions, however, too many of the benefits from this experiment accrued to holders of financial assets rather than to the average citizen. As a result, the political center of a slow-growth world has begun to erode."
In 2016, Republicans control both legislative chambers in 32 states. That’s up from 16 in 2000. What happened to the big donkey? Among other things, the Democrats decided to sell their base and their soul to a very bad billionaire and they got a very bad deal for both.
Venezuela’s central government has issued new dollar debt for the first time in more than five years, selling $5 billion in notes effectively to itself, using China's Haitong securities as underwriter, in what has been dubbed a "mysterious" transaction.
The American people have been punked by their own government and their central bank, the Federal Reserve, for years and the jig is now up. In 2017 both will lose their authority and legitimacy, a very grave matter for the survival of this republic.