What is Triggering the Market

Peter Boockvar thinks it is the end of QE. He explains that The Bank of England is keeping its benchmark rate at .5% while the CPI is at 3% to lay the groundwork for a future rate hike. The BoE said ‘monetary policy would need to be tightened somewhat earlier and by a somewhat greater degree over the forecast period than anticipated at the time of the November report’. If you read between the lines, the BoE is in fact getting people ready to accept a future rate hike and the hike will not likely be the minimal hike as in the past.

After their decision, the pound spiked by about 1%, the Gilt yield went up 7 basis points (the highest level since November 2015) and the 10 yr is up 6 basis points. It triggered a selloff in the European and US bond market, raising the yield on the sale of current bonds.

In a nutshell, I think Mr. Boockvar is on point. The market was held high by companies taking out low or no interests loans to buy their stocks. It wasn’t the moms and pops investing in companies because they believed the value of the companies was heading up. As far as I can see the market valuation is being driven by the government and big business, not the individual. When the tap is turned off for these loans, the stock price will falter as the main buyer will be taken out.

Source: kingworldnews.com

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