On Tuesday, the US markets deflated throughout the trading day. The Dow finished at 15168.01 (-133.25), the Nasdaq at 3794.01 (-21.26), and the S&P at 1698.06 (-12.08). The investment community and media attribute the sell off to government talks deteriorating. The real culprit, the US dollar, traded stronger throughout the day.
This is the great irony we are facing. The government shutdown and debt ceiling breach should be seen as negative for the US dollar which should cause the market to rise. Yet, the exact opposite occurs because the US dollar is still the world reserve currency. If this was happening in ANY other country in the world, the currency would weaken, imports would become more expensive, and their market would crash.
Now, we are not saying that a government shutdown and debt ceiling breach would be bullish for the markets. What we are saying is that as long as the US dollar is weak or weakening, the global economy will be expending! This however is bullish for internationals.
This morning, government D-Day, the markets are trading higher. The crippled feces flinging monkeys in Washington need to make a deal. If they don’t, we can see the risk on trade take hold (dollar strengthening and equities selling off).
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