(22 NOVEMBER 2017)DAILY MARKET BRIEF 1:Christmas rally start early

Looks like stock Christmas rally has already begun (although some would argue it never stopped). The World MSCI has now hit the highest level since March. While VIX index has declined to near historical lows (EURUSD 1 month volatility and US treasury yields are also falling last week’s spike). The catalyst was growing expectations for consumer spending for the holiday season starting with “Black Friday. ” In addition fed Chair Yellen over nigh warned that tightening policy via interest rates to quickly could keep consumer inflation from reaching 2% target. This dovish comment further indicate that risk of steeper policy path is skewed to the downside and gave stocks a boost as policy will likely stay loose for longer.

Yellen went on to say that removing accommodation too slowly could increase the risk of an strong labor market. However, this comment is already in line with Fed think. The flattening of the yields curve has not helped the USD as the curve suggest that expectations for Fed Fund rate has peaked. The market has already fully-priced in a December Fed rate hike and now is waiting for a new chair (likely Jerome Powell) gets sworn in. As for today trading volume have already decelerated as despite US data heavy calendar of durable goods orders, U-Michigan consumer sentiment, jobless claims and FOMC Minutes American traders are focused on Thanksgiving and the rest of the world could see some downtime. 

By Peter Rosenstreich