US$ down, US$ up, good for stocks, interest rates up, interest rates down, good for stocks, economic data good, economic data weak, good for stocks. Yes confusing I agree but the underlying thesis behind the continued rally in stocks seems apparent and that is the belief that the global economy in 2010 will continue to improve, thus corporate earnings will continue to grow and therefore buy stocks. Forget about the possibility of higher interest rates, forget about massive tax increases coming in 2011 and the potential impact on economic growth, the equity market won’t care until it does since for now economic activity (however lumpy) is looking up. Chinese trade data for Dec was great in terms of activity as exports rose 17.7% (5% est) and imports were up 55.9% (32.5% est). Also, Dec car sales in China rose 89% y/o/y and finished the year up 53%. The news lit a fire under the reflation trade and the US$ index is at a 3 1/2 week low.
What's been said:
Discussions found on the web: