Stocks finished the week with a slight decline as the Dow closed off 35 points to 18,867. Trading volume was off a touch. For the week the Dow had a net gain of about 27 points and is now up about 8.2% for the year.
The yield on the 10 year treasury continues to creep higher and now sits at a 2.33%. The yield curve continues to steepen indicating that investors are expecting higher interest rates and more economic growth in the months ahead. Some are calling the higher interest rates a “great rotation” in which money is flowing out of bonds and into stocks. According to the good folks at Bank of America Merrill Lynch, stock funds last week recorded a $28 billion inflow while bond fund experienced an $18 billion outflow which was the biggest move in over 3 years.
The US dollar continues to gain ground against global currencies. The euro continues to fall as does the Canadian looney, Mexican peso and Chinese yuan and every other currency out there. One side effect of this pill is the pressure a strong dollar is putting on gold. The shiny yellow stuff is now trading just above $1,200 an ounce. Where it goes from here is unknown since next month’s Italian vote on a constitutional referendum could spell doom for the European Union should Renzi resign. Polls currently show the referendum loosing by a widening gap and if this happens then gold might get a boost. Remember that a recent survey of money managers showed that the number one risk was a disintegration of the EU. Should this scenario play out in Europe then the US will continue to be the island of prosperity.