Last week, the Nasdaq finished up 164 points or 3.7%, the Dow was higher by 372 points or 2.1% and the S&P climbed 47 points or 2.3%. Despite the stellar performance on the week, the Nasdaq is still slightly in the red for the week.
While each of the above had individual catalysts that drove the respective stocks higher with the exception of Amazon and Facebook which did not have any apparent trigger point, the bigger question is why were our equity markets higher?
If one listens to the pundits, swamis and gurus, you will hear a plethora of reasons why are markets had one of the best weeks thus far in 2016. They will tell you stuff like higher oil prices, lower oil prices, yield curve, better economic data (hawkish Fed), weak economic data (dovish Fed), and all sorts of stuff that will make your head spin and which will more than likely leave your brain dazed and confused if not bruised and battered.
In all seriousness, there is one major reason and one major reason only why our markets were able to turn in a stellar week.
Simply put, it was our Federal Reserve.
After almost two years of the various Fed officials sending absolutely conflicting and contrasting message with one day a hawkish statement from one Fed President and the
The message over the last two weeks is uniform and it is clear. The Federal Reserve will be raising rates over the "coming month" if the economic data and the labor markets continue to improve.
We have all heard that the stock market likes clarity. Well, the various Fed heads couldn't be more clearer than they have been of late and the markets have finally listened and accepted and most importantly priced in higher rates for 2016. Fed Funds have gone from barely one rate hike in 2016 to maybe 2 in 2016 and maybe even 3.
That is the primary reason why we saw a good rally last week with of course the various other factors mentioned by the gurus, pundits and swamis all maybe lending a hand to a small extent.
My take remains simple on the interest rate issue. We more than likely will not see a rate hike at the June meeting given the pending Brexit issue but could see one at the July meeting, even if economic data here at home shows steady albeit slow improvement.
I don't think, despite all the political mumbo-jumbo across the pond in England, the British will vote to leave the European Union although the vote could be tight.
Next week will certainly be interesting to see whether we get a continuation of the slow climb in our markets after almost two years of absolutely nothing, if one is looking at the bigger picture.
(Long fb, amazn, aapl, nflx, googl, long and short options)
You can follow all my trades and also check out how the site's/blog's account performed relative to the indices last week at jaysomaney.com.
