Dollar Broadly Lower On Profit Taking/ RBC Capital Markets chief U.S. market strategist Jonathan Golub joined the SuperBull Club today. Golub says Years Left to Go in S&P 500 Bull Market. The U.S. Dollar Index is moving higher. The euro fell on the Greek parliament's vote and the German parliament's vote for a new deal, but the details won't be known for maybe a month. Greece can still be kicked out of the euro if the talks fail. If talks don't fail, the euro probably heads lower as the true cost of the bailout becomes known. If the euro breaks the March lows, it's on to parity and beyond. The Canadian dollar broke lower versus the dollar with the Canadian central bank's surprise cut this week; it is at a major resistance level. The Australian dollar is at a new post-2009 low.

Dollar Broadly Lower On Profit Taking

Wednesday, July 22, 2015 9:33 AM EDT

Profit taking cut into the US Dollar’s recent gains, driving it to its largest drop this month. The fall came despite widespread expectations that the Federal Reserve is possibly on the brink of a rate hike. Analysts are expressing some concerns that the Dollar rally may be over, and that the EUR/USD pair may not even approach parity as had been anticipated. One currency strategist in London said that the greenback’s momentum had finally ebbed.

As reported at 11:16 am (BDT) in London, the EUR/USD was trading lower at $1.0931, a loss of 0.8%; the pair was trading within a relatively tight band with $1.0924 at the low end and $1.0967 at the top. The USD/JPY was also lower at 123.7395 Yen, down 0.10%, nearly at the mid-point of today’s trading band. The US Dollar Index, used as a gauge of the greenback’s relative strength, was lower at 97.312 .DXY, slipping from Tuesday’s 3-month peak at 98.151 .DXY.

Wall Street Woes Impact Greenback

Many attribute the Dollar’s broad declines to disappointing earnings reports from United Technologies and IBM. In fact, all of the major indices closed lower yesterday which sent investors over to the US bond market which, ultimately, put the US Dollar under pressure.

Why Did China Announce Its Gold Reserves? Yuan Depreciation Pressure

China did as I expected. They waited until the currency was under serious depreciation threat to announce their gold reserves.

ZH: China Increases Gold Holdings By 57% "In One Month" In First Official Update Since 2009

Well, the long awaited moment has finally arrived and this morning, after a 6 year delay when, China finally admitted that it had been misrepresenting its gold holdings for a very long time, when it announced that its gold holdings had increased from 38.89 million to 53.31 million troy ounces, a 57% increase "in one month."

I doubt this is the whole amount, but it is the official number for now.

Here's the 12-month change in forex reserves against the 12-month change in CNY/USD. Notice a pattern? This is one big reason why I've expected yuan depreciation the past few years: it happens every time when forex reserve growth drops and it would've happened in 2008 of China hadn't re-pegged to USD.

I've written on yuan depreciation for several years. Some posts:

PBOC Propping Up Yuan Ahead of SDR Inclusion.
China May Pay A High Price For SDR Push
The Informational Power of the Offshore Yuan Exchange Rate

The U.S. Dollar Index is moving higher. The euro fell on the Greek parliament's vote and the German parliament's vote for a new deal, but the details won't be known for maybe a month. Greece can still be kicked out of the euro if the talks fail. If talks don't fail, the euro probably heads lower as the true cost of the bailout becomes known. If the euro breaks the March lows, it's on to parity and beyond. The Canadian dollar broke lower versus the dollar with the Canadian central bank's surprise cut this week; it is at a major resistance level. The Australian dollar is at a new post-2009 low. Emerging market currencies are near their 5 year lows and the Asian Dollar Index is on the verge of breaking down.

SuperBull Club: RBC Ups Morgan Stanley, Says Bull Market to Continue 6 Years; Sobering Alternative View from GMO

SuperBull Club

RBC Capital Markets chief U.S. market strategist Jonathan Golub joined the SuperBull Club today. Golub says Years Left to Go in S&P 500 Bull Market.

 The U.S. economy’s slow recovery may extend another six years, potentially doubling the duration of the bull market in equities, according to RBC Capital Markets chief U.S. market strategist Jonathan Golub.

Bull markets tend to continue until an economic cycle runs out, usually after about seven years, Golub said in an interview with Bob Moon on Bloomberg Radio. Given the pace of the current economic expansion, he said the cycle could last 12 years or longer, providing investors with reason to continue buying stocks.

“We’re going to see a lot more upside to the stock market,” Golub said. “This is going to go on for long enough that many Americans are going to be able to participate in the run higher.”

The Standard & Poor’s 500 Index has more than tripled during the current bull run, which at 76 months is the second longest in the past 60 years.

He forecasts the benchmark index will end the year at 2,325, the fourth-most bullish forecast in a Bloomberg survey of 21 strategists.

Upping Morgan Stanley's 5-Year Prediction

Gulub upped the forecast of Adam Parker, Morgan Stanley's chief U.S. equity strategist.

On Monday, Parker stated his belief: Another 5 Years to Bull Market.

I commented "The bulls are attempting to outdo each other as often happens at or near market tops. But who's to say this is a top? Why stop with a 5-year rally? Why not 10 or 20 years? Why not forever? There's plenty of room for more optimism, and this bull market won't end until we see every ounce of it."

It seems fitting that it took only one day for RBC to up the forecast of Morgan Stanley. Surely, someone can outdo six more years.

SuperBulls, it's time to strut your stuff.

Sobering Alternative View from GMO

In contrast, to the SuperBulls, I present the 7-Year Real Return Forecast of GMO.

image: https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj55-PIDBJ_Eb306ZOj8BZxlpDAlPjXr3B-WV7fWC_MKRhSV_SY7zyUglMSEqlJ5jElUl8uecQxTwhThoUtnFIe6fpSDeuSsR3U0-J6FE7nFFkB7GzSsZsJhaDv2SfEKaG3NQOF9MkQZuY/s400/GMO+7-Year+2015-07.png

*The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward‐looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward‐looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward‐looking statements. Forward‐looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward-looking statements. U.S. inflation is assumed to mean revert to long‐term inflation of 2.2% over 15 years.

Rain on the SuperBull Party

Note that GMO expects negative real returns in US stocks, on average, for a full seven years.

I hate to ruin a SuperBull party with forecasts that have been historically among the best in the world, but so be it.

Read more at http://globaleconomicanalysis.blogspot.com/2015/07/superbull-club-rbc-ups-morgan-stanley.html#EkwXUtQ1vQMEWPxj.99

Disclosure: None.