The Equation is about to Change
Ever since the election the primary force of the stock market has been the 99 % hope of tax reform, it has to happen as the Republicans are in control. A lot of people, even some Democrats and Independents view tax reform as a good thing. The Republicans appear at this point to have the votes to get some kind of tax change, tax reform would be too strong a word. So we will get something, but it will not be on face value anything close to what was envisioned a year ago, and in actuality it will be a disaster as it is built on the faulty logic of trickle down.
So now we see the stock market thinking something big is going to happen on the upside and ironically the same players think the dollar is going to breakout to the upside. How is that going to happen as the US keeps getting squeezed in the world trade picture? And look at the Dollar vs the Yen over the past year. Japan keeps trying stimulus, Trump is trying to make America Great Again, plus the FED is tightening, and yet we see the dollar down five to six percent from when he won the election.
So the 2 + 2 equation seems now to equal “0”, which must mean the “‘2’s” were “0’s”.
And don’t forget the Fed balance sheet shrinks a little each day.