In terms of economic news, there wasn't much today aside from a holiday-skewed but solid initial jobless claims report and softish data on construction spending and manufacturing sentiment. Those weren't market movers and Treasury yields are only fractionally higher.
It's all about capital flows. The US economy is strong but that's well known and it isn't the main driver. It's capital flows. The network effects around US assets are snowballing as US equity markets vastly outperform. We're at the point where major capital formation almost exclusively happens in US dollars and US markets. In addition, dollar-denominated derivatives dominate and spreads are far tighter in a world that's using far too much leverage.
The short answer is that right now the US and US companies are not just winning, but they're running up the score. The risk is that tariffs or fiscal hawks could ruin the party but for now the market isn't afraid of a Republican Congress.
This now-classic clip of Ross Gerber illustrates the sentiment.
This article was written by Adam Button at www.forexlive.com. Read More Details
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