Former trader Richard Breslow is a skeptical fellow, which is probably why I like him so much and why our views on markets generally tend to coincide.
On Tuesday, Breslow doesn’t see what there is to be so damn “punchy” about.
Sure, there wasn’t a great explanation for why the dollar and yields fizzled into Thursday and Friday following what were two ostensibly strong signals on the reflation front (a hawkish Yellen on Capitol Hill and a blockbuster CPI print), but that’s no excuse for us to be off and running coming off the holiday. Or at least Breslow doesn’t think so.
Below find the latest from the curmudgeonly trader and please do yourself a favor and note the bit about where central bank reserves might be ending up now that they aren’t going into US paper (hint: there may be a good reason why equities and credit just refuse to roll over and/or price in political risk).
Via Bloomberg
With the U.S. back from the long weekend, the week can start in earnest. The rest must have done some people good, because the feel of the market is a bit punchy as we start out of the gate. I’ve no strong explanation why other than it wasn’t entirely clear why things looked so squishy at the end of last week. Perhaps the natural desire to not carry a lot of risk over the holiday contributed to the moves. While, perhaps, also revealing people’s positioning at the same time.
- The moves today are nothing dramatic, to be sure. But the dollar feels all right, Treasuries seem comfortable having held the probe lower in yields, equities are equities, and even the Bloomberg commodity index is trying to take heart after finding support at its 55-day moving average
- It’ll be interesting to see if this mood has any staying power, but for a trade, I’m using the levels we saw on Thursday and Friday as very short-term pivots
- I don’t think this has anything to do with March being “live”. But until we get a piece of data that takes it off the table, it won’t hurt
- Perhaps there’s some comfort taken that the embarrassment concerning the National Security Council has had a much better outcome than we expected before it all started
- It may be the growing supposition that all this reported foreign central bank selling of Treasuries may be in large part a rotation into other securities rather than some rejection of the U.S. as a safe home for investment. U.S. high-grade spreads to Treasuries continue to narrow as if propelled by an insatiable appetite for exposure to this asset class
- Reserve rotation may also explain the seemingly inexplicable performance of the equity market. How much central bank money has poured into the S&P 500? Maybe the G-20 should discuss the moral hazards of foreign governments picking publicly traded company winners and losers alongside currencies and trade restrictions
- There’s no shortage of fickleness out there. I’m curious to see how this plays out
