Need to Know: Get ready for an historic ‘fiscal shock’ as the Dow sets up for another run at 20,000


Need to Know: Get ready for an historic ‘fiscal shock’ as the Dow sets up for another run at 20,000
  1. Need to Know: Get ready for an historic ‘fiscal shock’ as the Dow sets up for another run at 20,000
    marketwatch.com
    After a saucy flirtation with Dow 20,000 last week, blue chips are ready to make another go of it. Futures are in rally mode, the sun is shining (somewhere), and Donald Trump hasn’t beaten any company with his tweet stick all morning. …
    Finance

The “smart money” is in la-la land when it comes to this aging bull.

That’s the conclusion any market bear would have to reach after seeing our chart of the day, which illustrates just how unattractive the prospect of hoarding cash has become for fund managers lately.

Callum Thomas, who posted the Deutsche Bank visual on his Topdown Charts blog, explains that there are a couple ways of looking at this recent trend of putting cash in play.

“When you see a chart showing the average cash holdings of U.S. mutual funds dropping towards a five-year low, it makes you think the smart money is confident in the market,” Callum Thomas, wrote in a blog post. “This may be well-placed confidence, or a sign of an increasingly bullish or even overly bullish crowd — which can be a warning sign.”

So which one is it?

This earnings season could go a long way in answering this question, at least for the short term. Some banks are set to post quarterly numbers at the week’s end, results that will likely play a big part in shaping the market’s post-20K move — assuming we finally topple that pesky level by that point.

Actually, today could well be the day. After a saucy flirtation with Dow DJIA, +0.32%  20,000 last week, blue chips might be ready to make another go of it. Futures are little changed, but the sun is shining (somewhere), and Donald Trump hasn’t beaten any company with his tweet stick all morning.

So let’s get ready to end the obsession.

Key market gauges

Futures for the Dow YMH7, -0.14%  and S&P 500 ESH7, -0.12%  aren’t doing much, after earlier showing some strength. Nasdaq-100 futures NQH7, +0.00%  are slightly higher. The Dow DJIA, +0.32%  , S&P SPX, +0.35%  and Nasdaq Composite COMP, +0.60%  all closed higher Friday, with the S&P and Naz setting records.

Oil CLG7, -1.65%  and the pound GBPUSD, -0.9035%  are slumping on worries about rig counts and “hard Brexit,” respectively. See the Market Snapshot column for the latest action.

The call

Get ready for a “fiscal shock,” the likes of which hasn’t been seen since Ronald Reagan was in the White House, warns Citigroup’s currency strategist Steven Englander in a note cited by Bloomberg.

He said if Donald Trump and Congress carry out most of their stimulus programs while the labor market gathers strength, the U.S. dollar USDEUR, +0.0737%  could “easily” push past 90 cents per euro. “We can see a huuuge, not a baby, USD move ahead,” he wrote following the release of December’s employment report.

And, of course, a “huuuge” move in the dollar would eat away at the bottom lines of the companies who depend on foreign customers to bolster business. So, yeah, just another thing to worry about in 2017.

The buzz

The granddaddy of all auto shows kicks off this week in the Motor City under a Trump cloud. Chevrolet is the first of the big brands to take the stage and show off its new products in the wee hours.

General Motors GM, -1.10% which owns the Chevy nameplate, was stung by a Trump tweet to start off the New Year as the president-elect took aim at the car maker’s production plans. Look for more news to break in the auto sector in the coming days.

Read: How Ford redirected Trump’s criticism toward rival GM

Twitter TWTR, +0.47%  dropped the hammer on “pharma bro” Martin Shkreli on Sunday, suspending his account over his harassment of a freelance reporter Lauren Duca.

McDonald’s is handing the reins of its China operations to a group led by Citic 0267, +1.24%   in a deal valuing the business at up to $2.08 billion.

The stat

$44 billion — That’s how much Jeremy Grantham’s fund has shed since a peak of $124 billion back in June 2014, according to a source cited by The Wall Street Journal on Sunday.

It’s been one of the firm’s roughest stretches, with its flagship mutual fund missing out on the late…

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