A strong dollar will make American equity securities more expensive to foreign investors, while fixed-income securities more attractive, yield-wise. IMO you over-simplified. Thoughts?
I think you oversimplified. You jumped right to the "strong" dollar. A "STRENGTHENING" dollar will make all US investments more attractive to foreign investors. Whether it's fixed incomes, equity or currency investments. Low interest rates with a low USD have no attractive features whatsoever to a foreign investor. If the investor believes that rates will start increasing, then there is opportunity in many different security vehicles to increase their cash flows.
Good point, I did leave out the effects of inflection and slope One negative effect of the strengthening dollar will be a slowing of the trade deficit improvement that we've been seeing. How fast? I suppose that's one of the $$$ questions. While GE may see improvements in its financing activities, its international sales could get hurt with rising rates. My long position (~$31) is starting to worry me
Exactly. That is definitely a valid concern. But then again, if the ECB decides to raise rates in parallel, that should help keep the improving trade deficit from reversing the trend. We are really in a catch-22 right now though. I'm not sure that the risk of stagflation is worth keeping rates low. It'll definitely be a gamble either way the Fed reacts. But the question will be, what is the higher risk.
Regarldess of what the fed does I all know is I'm sitting on some sweet MOS and Visa gains. made so much $$ past few months.
If you'll look at the 2yr from a top down macro perspective, it closed up 33bps touching 2.74% today. That's a steep slope! Looking like higher speculation towards 25bps tightening imo. However, in the face of further elevated unemployment numbers, or another 5.5% (or worse) reporting, I would think the fed would pause?
There's another concern... if rates stay low for a few more months, more people will refinance and could be talked into variable rates that look attractive now, but... (we know how this ends) If the ECB raises rates, wouldn't that contribute to even more money flowing into Europe and out of the US? And on the second post... 'congratulations' I guess, but Visa seems so overvalued right now. I've been saying that since 70 though, so it's a good thing I didn't act on the thought. Global growth looks good, of course, but the P/E seems quite high
going from 4% to 2% is a 50% drop in interest payment. he is extending the lifeline of banks and brokers.. but a the expense of inflation. beggar thy neigbor policy. wall street buddies get a handout fbut mean and lean main street pays for it by high gas prices and food. zero sum gain. consumer spending is still the driver of the economy
Pure conjecture and speculation on your behalf. Feds do not cut rates and than hike next month. This is not a trading game or stock market price action. Fed rate cuts take 4-8 months to work fully and it would be at least a year before you can conjecture on your part if the Fed will hike rates.
Take it off the table before these urchins from hungry land reach out and swipe it from you. Donot trust this market ruled by chart destructive cowards these days.