We have reprogrammed our quantitative models and they show a large drop at the opening of trading today. Oil has spiked above $97 per barrel and gold is making new 25 year highs. The dollar is taking it on the chip against the euro trading at a new low.
The Fed’s hands are tied since they just lowered interest rates last week and the market did not respond to its fix. If the Fed continued to cut rates further, the dollar will weaken and inflation will erode any exporting gains.
To the consumer, prices are continuing to rise, i.e., gas, food, basic consumer staples. Inflation for the core consumer stables is running well ahead of the government’s 2-3% estimate.
We see technology continuing to head the sector rotation out of financials and into commodities.