Dear PGM Capital Blog readers,
On Wednesday, March 01, 2017, the DOW industrial Index, soared 300 points to close above 21,000 points for the first time.
Other USA major indexes posting also their best day of the year, on the back of President Donald Trump’s first address to the Congress.
Trump’s speech to Congress was judged by both sides of the political divide as his most “presidential” moment, at least in tone.
DOW JONES INDUSTRIAL SURGED ABOVE 21000 POINTS:
This milestone comes barely a month after the DOW has hit 20,000 on January 25, 2017, which means that it took the DOW only 24 trading days to go from 20,000 to 21,000. That ties a record set in 1999 for the shortest period between 1000-point milestones, of course, that late 1990s rally took place from lower levels, making it more impressive on a percentage basis. It also occurred during what turned out to be the height of the dotcom bubble that imploded soon afterwards.
Bank stocks have been among the biggest winners Wednesday as the S&P financial sector rose to its highest level since the Great Recession which began in December 2007 and ended in June 2009. f
Shares of Goldman Sachs, (NYSE: GS) were the biggest winner, last Wednesday and due to this contributing the the most gains of the 300 increase, that brought the DOW Jones Industrial above the 21,000 point milestone.
As can be seen from below 1-year chart since the election of the Trump, the shares of the company has surged with approx. 44 percent.
PGM CAPITAL COMMENTS & ANALYSIS:
Everyone is looking to Trump – who noted the market had added US$3 trillion in value since his election during the congressional address – as the stock market’s chief motivator.
As can be seen from below chart the DOW surged more that 2700 points. since Trump’s victory of November 8, 2016.
For apolitical bulls, the first thing to remember is that the market has been rising for a year now, not just since the election.
Currently investor sentiment has not been this high since 1987 – two market bubbles ago -, which brings up the most apolitical reason to be skeptical of the current rally,
Based on the above, we as a contrarian, are very skeptical and extremely worried that a crash of both the US-Markets as well as the US-Dollar are baked in the cake.
For reasons as mentioned here above, we believe that the high to overvalued US-Dollar is not sustainable in the long run.
Based on this we are advising our clients that mainly have their savings in US-Dollar pegged currencies to use their (indirectly) overvalued US-Dollar to invest in Precious metals and securities of conglomerates and disposable consumer goods manufacturers, with strong balance sheet and low valuation which are trading in under-valued currencies like the AUD, EURO, CAD and GBP.
However investors should keep in mind below quote of John Maynard Keynes:
“Markets can remain irrational for longer than you can remain solvent”
The above also points to a simple fact, You’re dreaming if you think this rally is all about Trump.
Until next week