The US Dollar Gets Stronger And Stronger

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In his Daily Market Notes report to investors, while commenting on the strong US dollar, Louis Navellier wrote:

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PPI was hotter than expected, the market reaction is not.

The PPI numbers came in this morning and they were sky high as expected.  While there is little doubt the Fed has all it needs to justify accelerating the tapering plans, and high valuation stocks have been selling off in anticipation of a higher interest rate environment.

Strength Beneath Surface

We shall have to wait and see what happens when the largest buyer by far, the Fed, rapidly slows and then stops making open market purchases.  It may be a case of having to walk instead of talk to move the needle.

The stock market doesn't look too good on the surface, but I have the same message for you that I had yesterday, which is that it's actually OK under the surface.

I lost count of how many are up more than 1% today, and the Russell 2000 is actually up today when the big indices are down, including Nasdaq. 

Despite a really pretty scary producer price index report that wholesale prices are soaring, the ten-year treasury bond yield is yielding 1.46%. So that's not bad.

Strong US Dollar

Twenty eight central banks around the world are meeting this week and they're all going to undershoot fighting inflation. They're going to do something token-like tapering a bit more or saying they're going to increase rates sometime, but they cannot raise rates as high as inflation is because the interest would destroy their economies.

So while all this goes on, the US dollar gets stronger and stronger. Why? Because we're less troubled up than a bunch of other countries. It's as simple as that.

The US is a better platform than other countries because our 50 States are competing with each other, and that competition just creates organic growth in America. So the dollar is very strong. We're going to have very good GDP growth this quarter, and the estimates are all over the place. But the worst estimates I can find are 5% from some economists.

More Buybacks

The Wall Street Journal reported last week that buybacks in the third quarter were the strongest ever recorded. Why?   Because they can go to the bond market and sell debt at 3% and the return equity is a lot higher than that. So one of the untold stories about the stock market is that it's not going up as much as earnings are going up. So its forecasted future P/E ratios are going down.


We're going to finish December on a strong note; it also means we're going to go into January strong and benefit from the volume that pours in and another round of good earnings.

Still, sales are becoming more difficult because the year of year comparisons are causing sales and earnings to slow down. But those few stocks that can sustain strong sales, earnings and profit margin expansion will continue to emerge as market leaders.

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