Well, it didn’t take much in terms of wobbling markets to bring out the warnings from all corners of the financial world.
Collapsing auto sales are what everyone’s focused on this week, although as we’ve noted on countless occasions over the past three months, anyone who cared to look could have seen this coming from a mile away.
Nevertheless, most people don’t “care to look,” and so stuff like “subprime auto crisis” seems to come out of left field.
In any event, Bloomberg’s Cameron Crise is out on Tuesday morning warning that we’ve entered “risk-off mode” which means you should “grab profits where you can” before the “bots” stop you out.
We’re in Risk-Off Mode Now. Grab Profit Where You Can
It seems we have now entered a market phase where at least some risk is being swept off the table. That’s perhaps a bit unusual for the start of a quarter, but then again, these are unusual times. That ZAR/MXN has turned tail and rallied 1% today after making fresh lows offers some insight into the market mentality: grab a bit of profit where you can.
- And who can blame punters, really? While talking heads may point to yen crosses as some sort of harbinger of doom, the fact is that despite rampant optimism in the United States, recent growth data hasn’t delivered. The three-month rate of change in auto sales is now the worst since the “Cash for Clunkers” hangover in 2009.
- If you are a credit tourist and you start hearing things about “subprime auto” for the first time in a long time, what would your reaction be?
- The key question is how deep any corrective phase may be. Absent a further deterioration in economic conditions in the U.S. and abroad, I tend to think the answer is, “pretty shallow.” After all, it’s not like most macro themes have performed well enough this year to merit broad and deep positioning.
- For the next few days, however, trading may well just be a game of figuring out who hasn’t stopped out yet, and sending the “seek and destroy” bot to take them out of some of their positioning.