In today’s 19th National Congress the most powerful man in the world just became even more powerful. President Xi delivered an eloquent three hour speech stressing the importance of globalization and China’s role of leadership going into the future. The reaction from financial markets in Asia was rather muted given the recent gains in global markets.
Market Overview
A brand new record high for the Dow Jones and a huge milestone of 23,000 points. The index is now up approximately 25% since Donald Trump was elected last November!!
Though Donald Trump might make a comment or tweet on this fact later today the rally may not be entirely Trump related.
Correlation does not equal causation!!
The Trump election did indeed wake the markets from a deep slumber that it was in with little movement between 2014 and 2016. However, if we zoom out and take a look, we’ll see that since the bottom of the market after the crash of 2008 we’re up 228%.
Many analysts agree that earnings ratios are at their peak yet investor sentiment remains extremely bullish on stocks.
Why are stocks going up?
The reasons are simple. First, there’s still plenty of cash ready for investment left over from the central bank injections over the past decade. Rates for borrowing money are still very cheap, which allows investment firms to borrow money easily and put it in the stocks.
Furthermore, any portfolio manager currently sitting on the sidelines is getting squashed. Try explaining to your clients that you missed out on a 25% rally because you think the markets are overvalued and watch them leave and go to a competitor.
This circle can indeed go on for a while as money does have a tendency to lead to more money. In this cycle particularly, due to the ample assistance from the central banks, I’m not even certain that historic PE ratios are even a factor.
Bitcoin Volumes
The Crypto Market is pulling back a bit. After the incredible highs we saw over the weekend it only makes sense.
Specifically regarding bitcoin, we need to understand where the excitement and the action are coming from. Sure, many people are fed up with government backed money and I do believe that the financial revolution is well underway. But besides grandiose ideology, there is one country that stands above the rest as far as bitcoin adoption. According to an article in bitcoin.com 60% of all volume on bitcoin is coming from Japan, with an additional 25% coming from the USA and 9% from South Korea.
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Well, that makes sense. After legalizing bitcoin as a currency in April, Japanese vendors and businesses are adopting it at an incredible rate. We continue to watch other interesting countries that seem to be on the verge of this type of adoption particularly Russia, Australia, and hopefully someday soon, India.
Many thanks to a local band that I’m fond of for the title of today’s update. And many thanks to everyone who continues to send me your comments, feedback, and relevant articles. Keep tagging me!!
