On Monday, U.S. stock markets did not trade to observe Martin Luther King Jr. Day. In response to escalating threats between the U.S. and Greenland, the U.S. dollar (UUP) (DXY) barely dipped. Investors should look beyond small changes to the currency.
Relative to the currency, gold (GLD) and silver (SLV) are at record highs and continue to climb. Investors continue to protect themselves from the worsening dollar by holding the two metals. They are not accumulating other currencies, which are also weak.
In the far east, Japan’s 10-year and 40-year bond yields both continued to climb. The 40-year bond yield crossed 3.87% for the first time. Markets are preparing for the Bank of Japan to tighten its monetary policy. That includes raising interest rates at regular intervals. Additionally, the prime minister might call a snap election, adding to Japan’s uncertainties.
The accelerated unwinding of the carry trade might trigger stronger selling pressure in U.S. stock markets. Valuations are already at lofty levels. Last week, momentum traders chose instead to accumulate AI-related suppliers. Seagate (STX), Arista (ANET), Western Digital (WDC), Amphenol (APH), and Corning (GLW) are some of the notably strong-performing stocks.
Investors sold off banks and credit card firms. JPMorgan Chase (JPM), Wells Fargo (WFC), Visa (V), and Mastercard (MA) declined. Any global slowdown risks would hurt their prospects.
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