Monday, January 4, 2010

US $, Commodity, Stock Markets

I'm under a bit of time pressure this week due to very tight schedules. Got to keep things very short and sweet.

(1) US $ has been strengthening but S & P 500 has been strengthening as well, positively(economic strength) rather than negatively(fear) correlated.

(2) While US $ is strengthening, the commodity index has been making moves similar to Shanghai Composite Index, rather than going down(taking US $ hedging out of equation). My take: both markets are consolidating before moving higher because of stronger economic recovery anticipation.

Why? My views:

(1) Strong Chinese economy = Strong commodity index = strong economic activities = strong global economic recovery

(2) Strong global economic recovery = stronger US economy = earning growth

(3) Stronger US economic recovery = potential interest hike = stronger US$ index

Some postulated strong US $ index = weak emerging markets because of potential strong profit taking and repatriate them back to the US. I could not subscribe to this view because:

strong economic recovery = strong emerging market(BRIC will be the leader).

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