November 18 2016 Market Minute
The Dow Jones Industrial Average, for the second week in a row, made a new high of 18,934. The NASDAQ Composite also hit a new high this week of 5,346. SP500 (2,181) is near its September 2016 high (2,193). Oil ($46.36) continues to trade in the mid $40’s. Gold ($1,208.70) stabilized after last weeks fall of almost $80. Interest rates were the big story this week with the 30 Year US Treasury closing above 3% for the first time since the first week of January.
US interest rates have jumped dramatically since the US election on anticipation of increased US Fiscal spending on infrastructure, faster US GDP growth, higher inflation, and more room for the US Federal Reserve to raise rates going forward. The 10 Year US Treasury, 2.33%, is up from 1.85% just prior to the election. One of the largest moves in the shortest period of time ever recorded. So much in fact that it broke the 10 Year US Treasury-10 Year German Bund Spread of 2% record from 1989, i.e. the 10 Year German Bund is only yielding .30%.
Globally, the impact of this increase in interest rates and the US Dollar prompted India, Malaysia, Japan, Indonesia, Singapore, and of coarse China to ALL intervene in the currency markets to ‘slow down’ the depreciation of their currency versus the US Dollar. In China’s case, the ‘Yuan” still dropped to an 8 year low versus the US Dollar [1:6.85]. Mexico also intervened, but via raising its over-night interest rate used to loan to Mexican Banks.