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Well, this is a bit of a disappointment. We have oil flying (up nearly 7 percent!), we have a weak dollar, we have China quiet all week, and we have a dovish Fed that traders believe have put some kind of floor under the market.
And this is all we get? The Dow Industrials up 40 points in a lackluster, average-volume session? In the past months, if oil would be up 7 percent and the dollar would be weak, we would have been up 200-250 points. What's wrong?
You can argue oil may be decoupling from the markets. Maybe. But the usual suspects that would benefit from a weak dollar are all up: energy, materials, industrials. In fact, there's more than four stocks advancing for every one declining.
So, why the crummy point action?
The Department of Labor has finally released its rules on financial advisers, introducing — in most cases — a higher "fiduciary" standard that requires brokers to act in the best interest of their clients, which may include providing lower cost alternative investments where appropriate.
Those of us who for years have been urging American investors to invest in lower-cost products like ETFs can only hope that this will be a wake-up call to those investors.
The new rules will only apply to retirement accounts, but I expect those retirement accounts to slowly —reluctantly — begin to offer lower priced funds, including lower-priced actively managed funds, as well as offering a sprinkling of ETF products.
And I hope that investors will start making more low-cost investment choices.
Lower interest rate concerns are again messing with the global markets, particularly financials. Many European bank stocks closed down 4 percent to 7 percent. Big U.S. banks are also down 2 percent or more.
The yen had another move up overnight to 108 to the dollar, a big move considering it was 113 few days ago. It's at a 17-month high against the dollar.
This is partly as a result of a more dovish Fed, but it's making life more complicated for central bankers.
After long delays, the Department of Labor is poised to release new rules Wednesday on the legal obligations of financial advisors. The new rules will likely require brokers to abide by a "fiduciary" standard — putting their clients' best interest before their own.
This is a battle about getting your financial advisor to act in your best interest. It's also a battle to lower the cost of investing, which, depending on your advisor, can be anywhere from cheap to very high.
In one sense, it's simple. There are essentially two different types of financial advisors: brokers and investment advisors. Both can sell you stocks and bonds and ETFs and mutual funds, but the standards are different.
I was asked several times over the weekend what the implications of the Panama Papers were for global markets. The short answer is I don't know, but there are several implications for the markets that need to be considered.
1) More bank regulatory scrutiny? To the extent that banks were facilitators of these offshore accounts, it would add impetus to more regulatory scrutiny.
2) More scrutiny by U.S. prosecutors of foreign banks? It looks like several subsidiaries of European banks were among the more active creators of these offshore accounts. U.S. prosecutors have already initiated fines and sanctions against foreign banks for violations of U.S. laws. This may provide additional information for even more scrutiny.
3) More regulation/taxation in general? This will provide even more ammunition to those on the more hawkish side of regulatory and tax issues — Sen. Elizabeth Warren of Massachusetts is a good example — who will use this to argue for even more bank regulations and higher taxation of the wealthy.
By the way, while much of the focus appears to be on political figures hiding (potentially) ill-gotten gains, it appears that one of the most common uses of these accounts is for a much more mundane purpose: to hide assets due to a divorce settlement.
Stocks are mixed today, and volatility is flat and trending down, and that may be a surprise to a lot of people. The market had reasons to go down. Stocks have been strong and are somewhat overbought. On top of that, we have a strong dollar and weak oil today, two traditionally toxic combinations for stocks.
But stocks are mixed, with the S&P flat. What's going on? The Fed's dovish posture and today's economic data is a positive for stocks.
The March nonfarm payroll report was mostly inline with expectations, with no major revisions. That moved the dollar up, putting some pressure on commodities and commodities stocks.
As the first quarter comes to a close, one sector notably stands out in the negative column: biotech. The iShares NASDAQ Biotech ETF, a market-cap weighted basket of biotech stocks, is down 24 percent this year. Unlike most of the market, it never participated in the mid-February bounce.
Let's look at just the biggest names, the biotech stocks in the S&P 500. All of them have performed terribly this year:
Vertex: down 37 percent
Regeneron: down 33 percent
Alexion Pharma: down 29 percent
Biogen: down 17 percent
Celgene: down 17 percent
Gilead Sciences: down 9 percent
Amgen: down 8 percent
Pretty ugly, eh?
Fed Chair Janet Yellen's uber-dovish speech Tuesday is already being felt in international markets. The renewed dollar weakness is affecting trading, as the yen strengthened overnight, and the Nikkei dropped 1.3 percent.
Elsewhere, many emerging market currencies, including the Chinese yuan, gained on the weak dollar. Expect further inflows into emerging market funds like the EEM. Foreign inflows into emerging market stock and bond funds hit a 21-month high in March.
Europe is trading in a more risk-on mode, with autos like BMW and Daimler up roughly 3 percent, and oil companies like Total and ENI bouncing back from Tuesday's losses. Banks like UniCredit are lagging.
The weaker dollar is helping commodity stocks like Anglo American, which is up 13 percent in London trading
Technology and energy are leading in early trading in the U.S.
Why isn't the market rallying more? I've heard this several times since Janet Yellen's uber-dovish speech to the Economics Club of New York.
I'm a bit baffled by the question. The S&P has risen nearly 20 points today and is now at a post-recovery high.
What else do you want?
First off, one of the reasons the market rallied in mid-February was because everyone thought central banks would be more dovish on the global slowness. That's exactly what has happened.
More important is the psychological impact of Yellen's comments. This is a shot in the arm for a market that is modestly overbought and oversold.
Most investors just want the bigger picture. Most average investors sitting in mutual funds just want to be assured that they're not going to be scared to death and go back to new lows in the next month.
Yellen's comments have made this much less likely.
What happens from here?
1) Lower volatility. The earnings picture is not pretty, as I have emphasized. But, the cause of much of the recent volatility has not been earnings, it's been the Fed. The Volatility Index is collapsing, poised to close near its lows for the year.
2) The dollar rally is likely over.
3) The pain trade has now changed, from lower to higher. The Fed is again putting a floor under the market. You can argue about how much higher stocks go, but this is like the old Bernanke put, only now it is a Yellen put.
4) It will not likely be a growth rally. Global uncertainty reigns. The dollar no longer rising is good for short covering in materials and energy, but nobody is rushing to buy these sectors for long-term investing, not until supply and demand get closer together. Investors still love dividends, so telecom and utilities are not going anywhere. And banks will still have trouble rallying with lower rates and a flatter yield curve.
Of course, there's lots that can still go wrong, principally the global economy. But Yellen's speech made it clear that: 1) she is in charge, 2) she is more dovish than ever, and 3) if things fall apart, they won't hesitate to go back to the old Fed and cut rates again, buy bonds, or do whatever it takes.
Fed watchers are hanging on how the Fed characterizes one word in its statement Wednesday—and that is inflation.
Mining stocks led the S&P 500 higher on Tuesday on strong quarterly results and a surge in copper prices.
To see Anthony Scaramucci running the communications operation has served as a bit of a shock to those on Wall Street.