Further signs of thawing in the frozen talks surrounding the fiscal cliff gave stocks a lift today. Republicans appear to be ready to give up ground on taxes while the Dems appear to be ready to conceded on Social Security and perhaps other spending.
The S&P 500 gained more than a full percentage point by the closing bell with volume positive by a better than 4-to-1 margin. Leading the charge were Financials (up 2.1%), Consumer Discretionary stocks (up 1.8), and Utilities (up a surprisingly strong 1.5%). All 10 S&P Sectors were positive on the day.
From a longer-term perspective, one significant event to occur was the Japanese elections over the weekend. The conservative Liberal Democratic Party won an impressive super majority in the lower house, bringing the party’s chief Shinzo Abe back to power as Prime Minister three years after a disastrous one-year stint as the PM.
Japanese voters were clearly fed up with the ruling Democratic Party of Japan, but also at work was Abe’s promise to do whatever it takes to bring down the value of the yen to make Japanese exports more attractive, kick-start the country’s ailing economy and reach deflationary escape velocity. To achieve these goals, Abe has pledged to take over the independent Bank of Japan and introduce even more aggressive monetary policies, which you can interpret as more money printing, among other actions. Of course if Abe thinks the United States and Europeans are going to sit on their hands while he devalues the yen he’s sadly mistaken.
With inflation-adjusted interest rates already negative and likely headed further below the zero mark, this makes the already strong case for precious metals even more bullish. Get em’ while they’re still cheap.