Stocks finished the day lower yesterday ahead of Jay Powell’s Jackson Hole speech today, dropping by almost 60 bps. What comes from tomorrow will be anyone’s guess; it seems like most of the global markets are looking for news that the Fed is prepared to taper its asset purchases; the one outlier here is the US equity markets. The markets in Asia have been fragile of late, and I talked about this in this week’s tactical update that is most likely is tied to the strengthening dollar.
Korea
The iShares MSCI South Korea ETF (NYSE:EWY) has fallen 10.5% just since the end of June. When you overlay the inverse of the dollar index on the chart of EWY, it becomes easy to see the relationship the two have with one another. So why does the Korean ETF fall? Because the stronger dollar brings inflationary force to that economy, and every economy likes it and slows economic growth.
Dollar
The dollar gets stronger because less printing by the fed means less bond buying, which can help to lift yields some and widen spreads with other countries interest rates. So yes, rising yields, a strengthening dollar, and weaker global equity markets tell us that someone, somewhere, seems to think that the dollar will continue to strengthen.
S&P 500
So why does the US equity market continue to rise? It is a good question and one that doesn’t really make any sense. But if there is any indication tomorrow that a tapering process is likely to come in September or November, it will be terrible news for growth stocks. The only sector that is likely to benefit from this are financials, as rates would rise some, not much, just some, and the dollar would continue to push higher, killing materials and energy names as well.
General Motors
General Motors (NYSE:GM) looks like it is breaking support at 49.00, with the next level look for coming around $45.25.
Salesforce
Salesforce (NYSE:CRM) jumped higher yesterday and barely managed to get and stay above resistance at that $268 region; now that gap at $260 needs to get filled.
Snow
Snowflake (NYSE:SNOW) had a solid day, rising nearly 7.5%. It is still working off that inverse head and shoulders pattern. It even has a shot of getting back to $322.
