During the whole 2016, US economy showed us pretty good results. Economic growth was solid (though, not too fast), unemployment rate went down to a really low level, income rose. However, Federal Reserve have not run to hike the interest rate. It did it only twice during the year – and each time it was a minimal hike possible. This way, when Janet Yellen told about three possible hikes in 2017, USD surged. The Dollar Index went 1.5% up and is as high as 103.0 just now: the maximum since 2003.
After such a rally, investors are looking for a new data. This Christmas week is poor on events, when only two important US-related events are coming. The first one is today, and it is Conference Board Consumer Confidence. Expectations are at their maximum since 2007. Is not it too much? In case, the result will exceed expectations, investors can conclude, high chances indeed for 3 hikes a year. So, USD rally can go further. Alternatively, if the actual result will be less than the forecast of 108.5, consolidation can take place and we will see some correction down for USD Index.
An even more interesting situations happens now at US stocks market. Statistically, it’s a time now for Santa Clause rally: the pre-New Year stocks raising. It normally happens during December, when the most profitable days are between Christmas and New Year. And indeed: since December 01, S&P 500 rose 3.0%, NASDAQ Composite went up 2.6%, Dow Jones Industrial Average added 4.1%. However, the main concern is: was not the rally too long and too fast? This year it started much earlier than usually, just after Donald Trump’s unexpected election. Therefore, November 07 is the real starting date of the whole-market happiness. Just to mention the same Dow Jones, that added 10.8% in this time period. During the last week it was as close as only 13 points below the important 20,000 level.
And so: will Santa help the rally to go on? Do we still have room for stocks going up? From one side, both pre- and post-New Year weeks tend historically to be very positive for the market. As well, interest rate is still at its historically low levels, and this sentence started to be very popular last weeks among investors. Positive economic data, mentioned above, is positive for companies not less than for customers. All this is pushing stocks higher. From the opposite point of view, has not Santa just ridden his deer to death?