The disconnect between real hard data and hope continues to gap wider. Major indices continue to defy gravity even as Retail Sales fell -0.2% vs +0.20% expectations, Consumer Confidence fell to 93.1 vs 95.0 expectations and the CPI was unchanged vs a +0.1% rise expectations. Core CPI tumbled to +1.7 % y-o-y vs the Fed's target of +2.0%.
This immediately sent a bullish signal to stocks and precious metals which saw gains across the major indices, gold and silver.
This in the kind of sick humour that the market is playing. If the Fed hikes interest rate the economy must be good, hence stocks go up. If the economy data is poor, the Fed cannot raise rate and so it must be good for stocks as well.
All this will lead to major catastrophe when earnings fell below expectations vs the price valuations which the Shiller Index now shows a PE ratio of 30.15.
The stock market may continue to rise as it is totally disconnect from the state of the economy but the risks will also increase exponentially. Retail Sales is the pulse of the economy and if it keeps falling consecutively it is signalling a major weakness ahead.
That is why I think the USD will continue to weaken. This could drive gold, silver and stocks of related miners higher.
The US and EU markets are already at lofty levels. Which is why I am shifting my focus to HK and China based companies listed on the HKEX which offers greater potential for upside.
This is just my opinion and it is encouraged you do your own research.