“The World May All Be Crazy”: High Five On Golf Course Underpins Global Rally

It’s really hard to believe.

The number of people adopting the “low bar” analogy I mean.

As I noted earlier this morning, the bar has been set so low for US foreign policy that “the fact that Trump met another world leader and didn’t cause an international incident is now a notable event.”

As hard as it is to fathom, the market is now hitting all-time highs based on the following two things:

  1. Trump telling airline executives “something phenomenal is coming on taxes”
  2. A picture of Trump high-fiving Shinzo Abe on a golf course

That’s it folks. That’s your bull thesis. A completely nebulous tax reform promise that was probably meant as a throw away comment and this:

golf

Here with some further color on this exceedingly ridiculous state of affairs is Bloomberg’s Richard Breslow.

Via Bloomberg

Markets have started this week feeling much relieved. The understandable fears that U.S.-Asia strategy might continue their lurch toward direct economic confrontation were given a respite. The phone call with Chinese President Xi went better than feared. And once the picture of the Japanese Prime Minister and American President high-fiving on the golf course was passed around, the sighs of relief were palpable.

  • Investors are taking comfort from the hope that, while the world may all be crazy, it hasn’t completely forgotten the realities of Mutually Assured Destruction
  • Asian equities have had a good day. But it feels like more of a relief rally letting them play catch-up to the U.S. And will need the U.S. side of the equation to continue providing support with both favorable prices and policies. Where you set the height of that bar is an important question to ask yourself
  • Japan’s Topix got within a hair breadth of highs not seen since the beginning of last year. But oddly, futures showed little of the cash market’s animal spirits until the official opening had prices leaping. With so many gap openings this year, it really doesn’t look like its moves are homegrown
  • China’s Shanghai Composite looks like it is on more solid ground as it makes a new year-to-date high and gains breathing space from its moving averages. When we saw these prices in December, the index was heading down. They’ve been recaptured in a much more constructive fashion. The One China discussion played well in their press
  • With U.S. assets playing such an outsized role for global markets’ trading, where do we stand and what should we watch as we begin a week that will see Chair Yellen prominently featured and some A-list economic releases?
  • The dollar index has staged a nice rally off the Feb. 2 lows. Right to where it needs to break higher or this will have only been a correction. It’s not a coincidence that the DXY’s high today was 101.02 – that’s an important pivot
  • Ten-year Treasury yields traded up to 2.43% today, a level that’s been an important pivot for the last two months. It’s pretty much the average yield for this year. And just below important moving averages. Just how hawkish do you fancy the Chair will be?
  • The S&P 500 is at all-time highs. Trade wars are being treated as nebulous concepts at the moment, but deregulation and corporate-tax cuts are things stock-pickers can taste and feel. In normal times, a third Fed governor vacancy wouldn’t have been taken well. But there’s a candy shop with the door left open
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