Despite the widespread fear on Wall Street that the "risk free" return of Treasury bonds is undercutting the demand for stocks, a growing body of evidence suggests that the stock market may yet surprise on the upside before the month is over.
For months I have been explaining why I felt the Dollar was undervalued while non US $ currencies were in many cases (Euro,Swiss,Yen) extremely overvalued given the condition of our economy versus theirs and our higher interest rate picture.
Treasury yields fell Wednesday afternoon after the most recent update on monetary policy from the Federal Reserve showed few signs that the central bank would ratchet up its pace of rate increases, even as the Fed conceded that the outlook for inflation had strengthened.
US stocks look set to follow European peers higher at the open on Thursday as investors continue to assess the potential for conflict between the US and Russia over the weekend's alleged chemical weapons attack in Syria.
Equities across the world took a beating after U.S. tech stocks were under pressure but off their worst levels on Tuesday, with Asian and European stock markets faltering. Government bonds, on the other hand, saw inflows as investors sought out berths from where they could shelter against the market turmoil.
The U.S. Dollar is starting to firm up while non U.S. currencies have stalled. The one here which may be a buy is the Canadian Dollar which has been slammed from highs at 8175 in late January to lows overnight at 7700.
The U.S. dollar extended its recent rout to hit three-year lows and gold rose to its highest level in 1-1/2 years on Wednesday after U.S. Treasury Secretary Steven Mnuchin said he welcomed a weakening in the dollar.