US economic reports were awful this morning. Consumer sentiment and industrial production
were below expectations. Everything is
being masked right now by the Greek elections and the Central Banks statement
that they will deal with it in a very positive way if they need to. It is hard to know which way the market will
steer after the Greek elections. A vote
against austerity (and a possible exit from the Euro) might cause a market
decline, because Central Banks liquidity programs might already be factored
into the markets. A vote for austerity
might see a market decline because Central Banks will not see as much need for
liquidity and further easing. I think, with
that said, we need to focus on the data, as well as factors which might change
the data. The data is not good. However expectations that the data will
change are very positive because of lower oil and gas prices, as well as the
continuing low interest rate environment for mortgages and corporate debt. One significant negative is the end of
‘Operation Twist’, at the end of June.
The end of this ‘stimulus program’ should cause long term interest rates
to rise.
