Obviously anything is possible but I thought these 2 were usually inverse, the dollars in a long term downtrend and the index is in a long term uptrend. To me the dollar looks bearish and the market could go either way, Maybe a slight bullish bias. That brings me to the other question, I thought higher interest rates (speculation) is generally bad for the stock index futures.. yet they are going straight up? In my opinion, nothing I see is for certain until the fed makes a move and trump is in office
The only thing that is bad for a market is uncertainty. Everyone's pretty positive that a few hike is coming, so it's already been priced in. A rate hike is a sign of an improving economy, which can balance out the sheer devaluation of stocks because the dollar is worth more. Also, interest rate hike improves the value of the currency. The odds that Trump won't make it to office or that they won't hike seem pretty slim right now. In any case, everybody's got their game plan and is now acting on it.
The chances of a rate hike is the main driver of USD, so if economy looks good and there is a risk of inflation then rates may rise (causing strength in USD) and a rise in stocks
Average participants are trying to short usd now. They will be squeezed near term which will take the usd higher. Bonds will grind lower. Make money
Your relationships are backward. The Dollar IS going higher and the question is, will the market rally with it. The US is the only country in the world that has the capacity to raise rates right now while other countries are still trying to cut. You HAVE to be long the dollar in this environment. Historically, rates and stock go up together and the reason should be obvious. Stocks in theory go up when firms have pricing power leading to higher earnings. Higher prices beget higher wages and tighter labor markets. Tighter labor markets push prices and therefore rates higher. Rates have to follow wages higher or you get excess inflation. What confuses people is that they assumed just because the market rallied on lower rates and stimulus means they must selloff with higher rates. Think of 2008 to 2013 as a one off event that does not line up with historical norms. Rarely in history have stocks rallied with lower rates or a flattening yield curve. And rarely have they not rallied with a steepening yield curve like we have now.
In another thread, someone is saying that US interest rate change could bring the same level of impact as Brexit. I know it's been 10 years since they last raised the interest rate but do you expect that it will bring the same price impact as Brexit, Maverick?
I'm of the opinion that this is all factored in. That immense public fear of a rise in interest rates as it relates to equities and whatever else...Is already FULLY baked in the cake. Look at it this way... Brexit was fully baked into equity markets. Thats why the market moved up. So then you probably say, "well the initial move was a major crash in futures markets just after brexit announcement and there was wild volatility?" I say...That was a market manipulation for the elite to buy cheap...they knew that brexit and almost all negative potential events are almost always baked in. These are the medium term events that allow the big players to interact with the marketplace. I try to look at these things from that lens.
Maverick please don't worry about my previous question because I don't think the interest rate change in US will have the same impact as Brexit since its gap is not as big as Brexit one Although I knew ECB was not going to change the rate through the secondary research, with their higher inflation and lower unemployment, I was not sure why they did not change the rate. I know it's just theory - when there is high inflation and lower unemployment rate, govt would step in to control the inflation by raising interest rate. Well, since euro is not merely representing a single country but the whole members, maybe that's why...