U.S. Stocks Trade Higher On Speculation Of Increased Liquidity, G7 Emergency Call June 6, 2012:
U.S. stocks rose in tandem with a strong close in Europe as speculation rises that global liquidity will be added to the world’s financial system.
An emergency conference call between G7 nations was made today and short-term forecasts for everything from QE3 to an LTRO3, euro bonds, IMF monetary infusions and other forms of ‘shared sacrifice’ were hot topics among traders.
Greece will hold new elections in mid June but the U.S. election is a bigger political economy event that has a larger magnitude and the downward momentum in stocks as well as the economy are already having a negative impact on President Obama’s chances of winning in November 2012.
Some political analysts we follow are already blaming the Fed and Ben Bernanke for allowing three months of lackluster employment data, slow growth in China and an unraveling in Europe to occur before signaling more easing as President Obama’s poll numbers decline.
We believe a coordinated action on the part of central banks is possible and Australia triggered the first move yesterday when they lowered rates .25 basis points to 3.50 – other nations may follow suit.
The Scott Walker Effect On Stocks
We are currently watching the Scott Walker election in Wisconsin to see if the political tide is changing and if this will have an impact on what some are dubbing a possible “Romney Rally” due later this year. In the short-run we are still watching financials, small caps and tech carefully. Financials rallied higher than the overall market which is a sign more bullishness is possible. We are still maintaining a somewhat defensive posture but we like equities at these levels medium/long-run as bonds become less attractive.