Market Overview: Both gold and silver are trading slightly lower in early action today. The gold market may be vulnerable to some profit taking at this point, after trending higher for several weeks. The yellow metal may not fall far, however, as ongoing risk aversion and uncertainty over numerous issues may keep the flight to safety bid going. Interest rates are declining today even with recent upbeat economic and inflation data which may also be indicative of a degree of risk aversion.
Key Data Points: The latest reading on leading indicators this morning showed a sharp rise of .6 percent. Factory data reportedly gave the index a significant lift.
Outside Markets: Stocks are seeing a little bit of pressure today as some investors are likely cashing in some profits. The stock market is not far from recent all-time highs, although the recent rally in stocks could potentially be getting a bit stretched at this point.
Of note is the fact that bonds have really not seen another major breakdown even as stocks have carved out fresh all-time highs and the Fed is sounding more hawkish in recent commentary.
The dollar index is is moving higher today and has maintained trade above the 100 level for a few sessions. That being said, however, the dollar still has not been able to mount a challenge to the highs seen in early January.
Bonds and notes are on the rise today as interest rates decline. Bonds have been relatively range bound for the last few weeks, and thus far do not show signs of another major breakdown. This could change quickly, however, if the Fed decided to hike rates in March or if the rhetoric from the central bank becomes even more hawkish.
The Big Picture: Markets seem to be sending out some mixed signals right now, and higher gold along with stable to falling rates begs the question of whether or not the stock market has possibly found a top or is in the process of making a top.
There seems to be considerable headline risk right now that markets have thus far been able to largely shrug off. That could change, however, if it appears that the Trump administration is having difficulties implementing its policies or if any major geopolitical issues arise.
Investors may continue to give the new administration the benefit of the doubt, as they await details on Trump’s tax reform proposals. A strong set of tax proposals could potentially ignite a fresh leg higher in stock prices while a disappointing tax plan could potentially become a catalyst for a stock market sell-off or significant correction.