1. Bank of Japan Raises Rates — Carry Trades Under Pressure
The Bank of Japan raised rates. Japanese 10-year bond yields are now at their highest level since 1998.
All of a sudden, Japan is getting closer to the kind of yields you’d normally associate with German bonds.
For the carry trade, the cost of carry is getting more expensive.
Meanwhile, the yen fell. Since Japan imports a significant amount of energy, things are about to get a lot more expensive domestically.
The big question: does this translate into higher inflation and eventually even higher rates?
2. Canadian Retail Sales Signal a Strained Consumer
Canadian retail sales declined 0.2% month-over-month in October.
Core retail sales were down 0.5%.
Early estimates for November suggest an increase of 1.2%.
But keep this in mind:
- Early estimates are based on limited data
- They tend to be volatile
- Holiday shopping season can distort the numbers
Bottom line: Canadian consumers are not in great shape right now. This needs to improve.
3. Silver Futures Show Signs of Backwardation
Looking at silver futures versus spot prices, there is a bit of backwardation showing up.
Take a look at the contracts between December and February versus the cash price.
In simple terms: Silver today is priced higher than silver a few months out.
What does this suggest?
- The physical market may be tighter
- The market could be expecting some easing in coming months
Anecdotal note: I visited a bullion dealer in the Toronto area yesterday and was told, “Bosses are saying buy less. “Purely anecdotal—but worth noting.
4. S&P 500 and the 50-Day Moving Average
On Wednesday, the S&P 500 closed below the 50-day moving average.
Yesterday, that moving average was tested, but the index managed to close above it.
This is a level to watch closely.
We’re likely entering a Santa rally, but early January could bring another test of this level.
Also important: the heavyweights in the index are drifting sideways to lower, which is acting as a drag on overall performance.
5. Final “5 Things” of the Year
This is the last “5 Things” of the year.
As you know, I usually take a break around year-end—and this year is no different. Possibly some travel as well.
Wishing you all Happy Holidays and Merry Christmas. I also hope you get some time to review your portfolio.
If you’re doing any tax-related selling, remember:
- Settlement is not instant
- It’s usually T+1
I’ll post on Instagram if anything comes up that I think requires attention.