WHAT’S NOT
Dollar’s Pain
The US dollar tumbled after the Fed’s dovish stance,
and is likely to remain under pressure in the near future
Downside pressure remains on dollar
The US dollar index continued to weaken
last month, falling to a five-month low at
$94.58, which was 5.9% off the $100.51
early-December peak. That low followed
the US Fed’s announcement that they
were lowering expectations for rate
hikes this year by 50%. Although the US
currency recovered some leading into the
end of the month, it remains in a down
trending channel within a larger one-year
trading range. If the March low is breached
to the downside we can anticipate a
move down to the 93.80 area, if not a
little higher. At that point the chance for a
more significant recovery increases. This is
assuming the dollar doesn’t fall decisively
below that price level. Regardless,
downside pressure in the dollar will
likely remain for the immediate future,
benefiting commodities, and equities.
Keep eye out for confirmation of
weakness in high-end property
Global real estate has boomed in recent
years with London and New York key
markets for international investors, each
reaching record high prices. Market prices
move in cycles and there is growing
concern that we have reached or are
close to a top. When real estate prices
turn it’s usually seen first in the high-end.
As reported in Business Insider, the US
Federal reserve noted last month that the
high-end property market in New York
City is looking “particularly sluggish.” For
London, as reported in the Financial Times,
major international property investors
are delaying purchases of UK real estate
until after the referendum in June on
whether the UK remains in the EU. High
prices, currency volatility, and the impact
from low oil prices are attributed to the
softening.
Pensions liabilities leading to disaster
Estimates for the amount of unfunded
or underfunded government pension
liabilities within twenty OECD countries
total $78 trillion, according to a recent
Citibank report titled, “The Coming
Pensions Crisis, as reported by CNBC. This
is government debt that is not included in
public debt-to-GDP ratios, noted Business
Insider. The amount of outstanding
government debt of those countries
triples when including unfunded liabilities,
added The Wall Street Journal. For years
governments have been postponing
pension contributions to meet current
liabilities, or siphoning off existing funds
for “emergencies,” all the while putting
workers promised retirement benefits at
great risk.
What’s happened in the city of Chicago,
Illinois, the third largest city in the US, is
an early symptom of a global problem.
Unfunded liabilities to Chicago’s employee
retirement accounts is $20 billion, and
there’s not enough money to cover it. This
is putting pressure on city services, and
has led to a significant rise in property
taxes, thereby pushing some residents
out of the city. Chicago saw the greatest
population decrease of any major US city
in 2015, reported the Chicago Tribune. On
top of all that, the state of Illinois is $111
billion short on its pension liabilities.
By Bruce Powers, CMT, Chief Market Analyst at MarketsToday.net, and President at WideVision
April 2016 | www.wealth-monitor.com
Downside
pressure in the
dollar will likely
remain for the
immediate
future, benefiting
commodities,
and equities
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