The Dow Jones Industrial Average rose last week, despite a 277-point dip on Friday that was attributed to worries about the impact of the Coronavirus. The gain reversed the 600-point drop on 31 January and set a record intraday high of 29,407 on Thursday.
As we go to press, the Dow hit a record high before backtracking following Federal Reserve Chairman Jerome Powell’s statement that it is “too early to say” what the impact of the Coronavirus would be on the U.S. and the global economy, but the central bank would be “closely monitoring” it.
What also has helped prop up equities following the initial market selloffs following the Coronavirus scare is the Chinese government pumping cash into its banks and equity market and the prospect of cutting interest rates to blunt the economic impacts of the Coronavirus epidemic.
Moreover, as per Powell’s remarks, there are increased expectations that the Fed will take steps to minimize the virus’s effects in this country helped send stock prices higher.
The strong week reflected “the ebb and flow between headlines and fears,” said Mark Hackett, Nationwide’s head of investment research.
Last week, Amazon joined Alphabet (Google’s parent company), Apple, and Microsoft as the latest company to close a trading day with a trillion-dollar market capitalization.
The WSJ Dollar Index is now at its highest since early October, and gold while dollar sensitive, it is still trading in the $1,570 range… sharply up from last September when we issued our Trend Alert: The Gold Bull Run, when gold was trading at $1,332 per ounce.
PUBLISHER’S NOTE: Investors are looking for safe-haven investments amid fears of economic damage from the Coronavirus outbreak; also, U.S. banks still pay interest instead of charging fees to depositors, as is the case in Europe/Japan where banks apply negative interest rates. These factors will also continue to favor the dollar.
Typically, gold and the dollar have an inverse relationship; when one is up, the other is down. So the strong dollar should have pushed gold prices sharply down. Both rising together, as they did last week, indicates that slowing economies in the U.S. and around the world are leading investors to hedge their bets.
