Week In Brief: March 20

March 20, 2015

As if on cue (and as we predicted), the S&P 500 hit its 125-day moving average last week and rocketed higher. Much as it's done throughout most of the last few years. The topic now becomes whether it has the momentum to ascend its 2117 high, or if we're range bound for some time to come.
The Good
Building permits rose 3 percent... Fed policy catalyzed equity buying...
The Bad
Housing starts plunged 17 percent YOY... Industrial production missed expectations...
The Ugly
What happened to the administration's promise to mend all those fences overseas? How do long time European allies determine to join a China-led investment bank? Putin and President Obama don't speak. Netanyahu and President Obama don't speak. We fought for Libya's freedom. Now it's overrun with radicals. We fought and died for Iraq's freedom. No it's overrun with radicals and Iranian militias. The more one analyzes U.S. foreign policy, the more one realizes that we have no foreign policy.
1937 Again?
Hedge fund titan Ray Dalio had the financial world tittering last week over his client note on the potential risks of the Fed raising rates too quickly. Specifically, Dalio referenced the 1937 scenario during which the Fed acted prematurely in the Great Depression's aftermath and sent the economy and stock market plummeting.
The Fed, as if on cue, then commented on its intention to not hurry into anything, so alleviating some of the markets concerns. But we were left to wonder, how did markets respond to the Fed's premature tightening in the decade proceeding 1937?

(Source: Ben Carlson)
Today's dynamics are far different from the mid-1930s. So, it's impossible to make a like-to-like comparison, then to now. But we can use historical scenarios to asset potential risks and better position our own efforts. Much like Dalio is doing, I'm sure.
Power Politics
PM Benjamin Netanyahu's reelection did not bode well for President Obama. The two have major disagreements on current U.S. efforts to establish a nuclear treaty with Israel's existential enemy, Iran. And began sniping at each other after Netanyahu agreed to address the U.S. Congress without first consulting with the White House.
Well, though his future in Israeli politics briefly appeared in doubt, Bibi is back. Which will put pressure on the White House to really deliver with Iran. Netanyahu's reelection also eradicates any hopes of a return to the Middle East peace talks while both are in office.
It took a couple of days after the election for President Obama to make the obligatory congratulations call to Netanyahu. But, he did. Hopefully the two leaders can amend their current difficulties and focus on their common problems. Of which there is no shortage.
Chief among them? The Iranian nuclear deal SecState John Kerry is cobbling together. Critics contend that it increasingly resembles ObamaCare for arms control. "A substantive mess undermined by a failure to build adequate political support.. a poorly designed mega project others will have to clean up later," as described The Wall Street Journal's Daniel Henninger.
President Obama seeks to subvert the traditional practice of Congressional approval on such a deal. Instead, it will receive a rubber stamp from the U.N. Security Council.
Netanyahu has repeatedly said that, concerning a nuclear Iran, no deal is better than a bad deal. But President Obama's appears insistent on closing his current deal. All of which makes this a really, really big deal.

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