Just an observation looking at the DOW futures for today's open - down over 100 points, Gold and silver starting to rally - gold stocks were up heavily on the ASX today. AUD stronger. Now that the US Fed Reserve has shown their hand on possibly never raising rates for the foreseeable future, does that finally signal an end to the USD strength? I think alot of the USD strength over the last few months was not because of the 'safe haven' status, but rather because the market was expecting the quantitative tightening to start this month. Might see things really start to turn sour over the next few months in the US.
the inevitable bond collapse will send the U.S. dollar index over the 100 mark, if not earlier. The u.s. dollar is showing a lot of strength as it patiently gathers for the next push. you are basing your opinion on one event. Interest rates will rise, not this month but it is inevitable now. Don't believe that Yellen controls these things. It will be forced upon them if they don't do it soon.
Bonds have also rallied since yesterday... Tolly, long term bonds are still in a mega uptrend. If the trend continues up (yields down) it will drag the dollar up with it to new highs. If the trend breaks down (and we start seeing inflation), it will eventually drag the dollar with it (yields up, dollar down) Or do you mean a doom scenario where the US Government goes bankrupt? Or a less doomish yet violent move in bonds from selling and lack of liquidity?
euro bonds are the most in danger because that is where the rout will begin. It is the indebted euro zone countries that will collapse. The u.s. bonds may react differently. The long dated bonds will be creamed but the short term bonds may put up some resistance. This is because the u.s. bonds will still be seen as relatively safe. Don't put the dollar and bonds in a simple up/down relationship. The dollar demand will not cease. Remember the bond market is many, many times bigger than world stockmarkets so all that juicy capital will flow somewhere and only to the places that can absorb it.....u.s. dollar and the u.s. stockmarket will be the end recipients of a lot of it.
In the scenario you describe (European doom scenario) I still don't see how US bonds wont rally. When we start seeing inflation: Bonds sell off, gold, oil, copper have put in a bottom and begin an up trend again thats when the USD would begin a bear market
The relationships are not set in stone. Just because it may have happened in the past does not mean it will happen again. The bond sell off will not be because there is a better option. It is because you probably won't get your money back at all. This is what will drive the rout. U.s. bonds, especially long term will be very vulnerable. Interest rates will spike big time in Europe and will move up in the U.S. very soon. Bonds are a gamble as to what interest rates will do in the future. The bond bull is dead. Long live the bond bull.
The foundation of the European banks and the euro will become worse than uncertain. That will be one of the main drivers of the U.S. dollar. If you have been following the news, you will have read that all that q.e. in Japan has come to nought. They are going down the toilet thanks to government interference and incompetence......others do not agree but no government can control what the market will do. Eventually the market has its way. It is only a matter of time.
Once interest rates start to rise the bond market will start falling and take stocks down with it. Once the rest of the world rushes to get out of U.S. bonds that will also take the U.S. Dollar down It is inevitable
In a normal bond retreat yes. What we have now is hundreds of billions, if not trillions of bonds that will either fold or the maturity date will be pushed so far back they might as well be worthless. Interest rates up and stocks down is not a fixed relationship. You can have both at the same time. Interest rates rose in the 80's and so did stocks.
