Why are the US Markets so resilient even in the face of political turmoil? Why did we have the best August in the last 4 years? Why the September swoon may not even happen as many expect?
The answer to all of the above could be due to the flood of money flowing into the United States because of the crisis in the emerging market currencies. Watch this clip and imagine the sound of water as the tumbling currencies of the emerging markets. Money is flowing into the United States from all over the World as we see turmoil with Turkish Lira, Argentina Peso, Indian rupee and so on. Dollar keeps getting a bid as Investors flock to safe haven. To make matters worse, Fed is on track to raise interest rates because of strong US economy. This creates more demand for the dollar, aggravates the fund flow into US and helps to keep the Stock Markets afloat. Agreed that the Markets are overbought and ripe for a pullback amidst uncertainties of mid-term elections and probability of Trump impeachment as the Cohen-Manafort-Mueller drama unfolds. But the external force of “emerging” flood of funds is drowning the bears for now.
Just like “Sell in May and go away” was a bad idea, September swoon “may not” be coming soon!