Dow Heading for 20,000, Stocks Rise, Gold Falls Ahead of Fed Rate Hike

Blue-chip index nears milestone as tech joins the Trump rally--Traders assign 100% odds to a Fed rate hike on Wednesday:

DJIA 3-month chart (source: google.com)

S&P500 Index (source: google.com)

Fed Interest Rate Hike Bad News For China? At the Federal Reserve Open Market Committee (FOMC) meeting on Wednesday, an interest rate hike of 0.25% is expected. This rate hike will be only the second increase by the Federal Reserve in 10 years (the first increase took place December 2015). This may have ramifications on emerging markets in general and China in particular which faces an economic slowdown. A U.S. interest rate increase will likely increase capital outflows and generate additional growth headwinds for China. 

Headlines Tuesday leading up to the expected Fed Rate Hike:

Dow Heads for 20,000 as Stocks Rise, Gold Falls: "Global stocks advanced, sending the Dow Jones Industrial Average within 50 points of 20,000 on speculation that the Federal Reserve’s expected rate increase is a signal of confidence that the economy is strengthening. The dollar and Treasuries were little changed. IBM Corp. and Intel Corp. led gains in the blue-chip index as it heads for a fresh record and the round-number milestone ... Its relative-strength index stood at the highest level in two decades ..."--Bloomberg.com

IBM Lays Out Plans to Hire 25,000 in U.S. Ahead of Trump Meeting: "IBM Chief Executive Officer Ginni Rometty said she plans to hire about 25,000 people in the U.S. and invest $1 billion over the next four years, laying out her vision for filling technology jobs in America on the eve of a meeting of industry leaders with President-elect Donald Trump. Rometty, who is on Trump’s advisory panel of business leaders, will join Facebook Inc.’s Sheryl Sandberg, Amazon.com Inc.’s Jeff Bezos and Alphabet Inc.’s Larry Page and Eric Schmidt at a summit with Trump Wednesday in New York that is said to focus on jobs."--Bloomberg.com

Small Business Owners' Optimism Skyrockets Following Trump Victory: "The November reading of the National Federation of Independent Businesses' small business optimism index jumped to 98.4 from 94.9 — its sharpest surge since 2009 — with all of the increase in sentiment coming after the U.S. elections held on Nov. 8."--Bloomberg.com

After talking with Trump, Bill Gates likens president-elect to JFK: "... in the same way President Kennedy talked about the space mission and got the country behind that, I think whether it's education or stopping epidemics ... [or] in this energy space, there can be a very upbeat message that [Trump's] administration [is] going to organize things, get rid of regulatory barriers, and have American leadership through innovation ... Of course, my whole career has been along those lines. And he was interested in listening to that. And I'm sure there will be further conversation."--Microsoft co-founder Bill Gates after recently speaking with Trump--CNBC.com.

"Allegations of Hacking Election Are Baseless" Say High-Level American Intelligence Officials: "The various ways in which usually anonymous spokespeople for U.S. intelligence agencies are equivocating – saying things like “our best guess” or “our opinion” or “our estimate” etc. – shows that the emails alleged to have been “hacked” cannot be traced across the network. Given NSA’s extensive trace capability, we conclude that DNC and HRC servers alleged to have been hacked were, in fact, not hacked."--WashingtonsBlog.com

Obama Says No Evidence that Russia Tampered with Votes in Election: During an interview with the Daily Show’s Trevor Noah, Obama downplayed the hack of a private email account of Clinton campaign chief John Podesta. "We were frankly more concerned in the run up to the election to the possibilities of vote tampering, which we did not see evidence of, and we’re confident that we can guard against ... None of this should be a big surprise,” Obama said, “Russia trying to influence our elections dates back to the Soviet Union.” Obama dismissed the hack and the leaked emails as “not very interesting” and lacking “explosive” revelations. He puzzled as to why it was an “obsession” by the news media despite the knowledge that the Russians were responsible.--Breitbart.com.

Trump's selection of  Tillerson lifts hope of US rapprochement in Moscow: "Sergei Karaganov, one of Russia's most senior foreign policy hands, says the difference is that Tillerson is a hard-nosed pragmatist who [as Secretary of State] will focus on getting things done, and leave aside the many political and philosophical issues where Russia and the US will never agree. Like many in Moscow's upper circles, Mr. Karaganov has met Tillerson and says that his ratification would be a signal that genuine and lasting detente between the two powers is a real possibility."--CSMonitor.com

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MacroView | Trump Effect: Breaking The Curse, A New Paradigm

Domain Mondo's weekly review of  macro economic and investing news:
 
MacroView Feature • Trump Effect--Breaking the Curse, A New Paradigm--"the 'Curse of Correlation' has lifted, for now ..."--Convergex.com

The “Risk On, Risk Off” markets of 2010–2015, responded to macro news, everything depended on market perception of central bank interest rate policy. Since the election of Donald Trump, investors have been identifying new macro trends (e.g., higher interest rates) and unlock potential winners--financials, industrials, materials, healthcare--and sell losers (tech, utilities). Correlation data, post-election, indicates this time is different from any point since the Financial Crisis. Get Ready for Dow 20,000 | Barrons.com: "... the Dow is outpacing both the S&P 500 and the Nasdaq. It could continue to outperform in the year ahead ..."

Dow Jones Industrial Average (DJIA) UP 7.77% since Nov 8 (source: google.com)

• Fed expected to raise rates

Video above published Dec 9, 2016, by FT.com: Sam Fleming talks to Donald Kohn and Joseph Gagnon about the prospect of higher interest rates and Donald Trump's proposed tax cuts. The Fed Open Market Committee (FOMC) meets December 13-14. 

Why the Fed will no longer be the big deal when it meets this week: The Federal Reserve Open Market Committee on Wednesday (Dec. 14) is expected to announce an interest rate hike — its second in a year, and also the second in 10 years. However, a 25 basis point increase in the Fed funds target rate has become anticlimactic because there's a new game in town for investors — the Trump Effect:

"The surprise of the Republican sweep of Congress along with the Trump administration has really changed consensus expectations almost 180 degrees. We really are focusing in on some of the impacts that some of the policy changes could have. We may be shaking up the economic world in terms of what we've been waiting for, what the Fed has even been saying — we need Congress and fiscal policy to do some of the heavy lifting here. I guess in some cases the Fed isn't really leading the story as much as they had in the past, and in some ways the Fed is really following the market right now in terms of raising rates," said Scott Anderson, Chief Economist for Bank of the West.--CNBC.com

Why Trump's Fiscal Plans Won't Blow Up the Budget: Factor in the extent to which animal spirits will be unleashed--analysts cite a Trump proposal that could turbocharge corporate spending--Trump's business plan allows manufacturing companies to immediately expense their capital investments, while the deductibility of interest expenses on future loans would be eliminated, significantly increasing the net present value of a given investment project, and encouraging companies to ramp up spending.--Bloomberg.com.

• China forex reserves drop $70bn

Video above published Dec 8, 2016, by FT.com: China’s foreign exchange reserves fell nearly $70bn last month as the country’s central bank burnt through more of its war chest in its battle to defend the renminbi from greater depreciation on the back of accelerating capital outflows.

•  Watch the yuan: The attitude of emerging-market policy makers to greater financial liberalization will be key in driving the next stage of global entanglement. China is, therefore, the elephant in the room. Beijing wishes to promote the global use of the yuan for trade and financial transactions, and permit two-way capital flows. But it faces a challenging balancing act, amid capital outflows and yuan-depreciation expectations. Outflows since the summer have ticked up since this year's low of $37.5 billion in February, rising to $69 billion in October, slightly up from $67 billion in September, according to Bloomberg Intelligence.--Bloomberg.com

•  Trump to name Exxon CEO Tillerson as Secretary of State: source | Reuters.com.

•  Tim Cook, Larry Page, Sheryl Sandberg ... are going to Trump’s tech summit next week | Recode.net: also attending Microsoft CEO Satya Nadella; Cisco CEO Chuck Robbins; IBM CEO Ginni Rometty; Intel CEO Brian Krzanich; Oracle CEO Safra Catz and even Jeff Bezos of Amazon.com Inc. The meeting will take place Wednesday (Dec. 14) in New York:

“I plan to tell the President-elect that we are with him and will help in any way we can. If he can reform the tax code, reduce regulation and negotiate better trade deals, the U.S. technology industry will be stronger and more competitive than ever.”--Safra Catz

•  Japan’s Pivot from Obama to Trump | NewYorker.com: "Abe’s visit to Trump Tower in November went against the wishes of Obama’s White House, according to a Japanese media report, which cited an unnamed diplomatic source who said that it would be “unprecedented” because, “Mr. Trump is not yet the president.” But Richard Samuels, who heads the Center for International Studies at M.I.T., told me that Abe’s team “did what they had to do, quickly and well.” ... Ironically, Trump’s tough talk may help Abe achieve what Obama’s pivot never could: broad support from the Japanese public for revising Japan’s constitution." See also: Is Donald Trump already the President? | WashingtonExaminer.com: The era of Trump has already begun.

•  Democrats the "real threat" to the First Amendment: Time Warner CEO Jeff Bewkes told Business Insider's Henry Blodget that the "real threat" to the First Amendment did not come from President-elect Donald Trump during the campaign, but rather from the Democratic Party."--BusinessInsider.com.

•  One more thing: More #FakeNews from the WashingtonPost.com and NYTimes.com--see Anonymous Leaks to the WashPost About the CIA’s Russia Beliefs Are No Substitute for Evidence | TheIntercept.com by Glenn Greenwald; and also Kellyanne Conway calls [purported via anonymous sources] CIA report on Russian election meddling ‘laughable and ridiculous’ | WashingtonPost.com:

No rational person should blindly believe anonymous claims of this sort – even if it is pleasing to believe them. https://t.co/ea4QxdyP3c

— The Intercept (@theintercept) December 10, 2016

Unfortunately, as we found out on 9/11 and afterwards re: WMD in Iraq, the worst "intelligence" failures in U.S. history, "U.S. intelligence" claims or beliefs (particularly those of the Central Intelligence Agency a/k/a CIA) are often wrong and not credible. But at least the Russians are getting a good laugh out of all of this: Obama orders ‘full review’ of election hacks, results not to be made public | RT.com. See also: How To INSTANTLY Tell If Russia Hacked the Election | washingtonsblog.com.

-- John Poole, Editor, Domain Mondo


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