After the worst Thanksgiving week since the Great Depression the stock market skyrocketed on Monday & Tuesday. This was on the heels of an announcement by the Federal Reserve that they are taking emergency measures to supply european banks with dollars (Swap lines).
I find it ironic that the worse the news is the better the market does. The rumor is that a European bank was on the verge of collapse and somehow a swap line will fix things…so the market skyrockets – sure, makes perfect sense (not).
What is perhaps stranger is the Federal Reserve essentially rooting for metals to go higher by not allowing the dollar to appreciate. By opening swap lines at low rates the Federal Reserve allows other currencies to swap their currencies at the Fed for dollars – meaning they don’t have to sell their currencies in the market (depreciating their currency) and buy dollars (leading to appreciation in the dollar. The dollar is much stronger than it appears – but the Fed is hell bent on keeping it weak.
I can’t rule out more market surges, but the risk in the market today is not reflected in the stock market.
Scott Dauenhauer, CFP, MSFP, AIF