Summing up Monday…
“Something’s happening in the sky, look”…
“Put on your movie glasses so you don’t go blind”…
So you couldn’t look up today. And if you’re still long risk, you probably don’t want to look down either.
Because remember, no matter how dovish or non-committal Yellen and Draghi manage to sound at Jackson Hole, they’re going to try and normalize eventually and if the following now famous chart from Citi’s Matt King is any indication, that means that global equities are like Wile E. Coyote:
As you ponder that, do recall this from Deutsche Bank’s Aleksandar Kocic:
The inevitability of the law of gravity is faced only when the subject realizes it. Ideological interpretation: Looking down is a mistake — the system works only if no one opens his eyes.
The S&P moved into the red for the quarter earlier today, but at the close it was back to basically flat. Still, a seven-quarter win streak is on the line:
The Nasdaq fell for a third consecutive day for the second time this month:
You can kind of get a sense of the mood if you look at the havens. As Bloomberg notes, “flows into gold, treasuries, JPY and the Swiss franc attracted investors attention amid the tumult in Washington that imperils the president’s policy agenda.”
Here’s some maybe useful context for the broad dollar and yields:
Regular readers already know the story with the Russell – simply put: it’s over for that particular “Trump trade”:
Of course let’s not kid ourselves, it’s over for all of the Trump trades. Here’s Goldman’s infrastructure and high tax baskets demonstrating the same fade dynamic:
Remember that “mystery” spike in crude an hour and 20 minutes ahead of Friday’s rig count data? Yeah well WTI very nearly wiped that off the board on Monday:
“We are currently seeing some profit-taking after Friday’s strong rally ahead of this week’s inventory data,” Hans van Cleef, senior energy economist at ABN Amro said. “Fresh uncertainty about inventories and OPEC compliance (with agreed production cuts) could be enough reason to sell some of the long positions.”
“Somebody is taking some profits,” Michael Lynch, president of Strategic Energy & Economic Research, adds. “We are in the summer doldrums and every move sees a counter-move.”
Here’s a bit of interesting color from Bloomberg’s Dani Burger:
The precious metal has rallied 11 percent in 2017 to trade at $1,294.40, compared to a 10 percent slump in crude. That divergence in price may still be going, meaning gold should continue to outperform oil before the 34-month cycle ends, according to a study of past trading patterns for the two assets.
Europe was ugly as only 3 out of 19 Stoxx 600 sectors rose.
Notably, the DAX was down for a third consecutive session:
But don’t worry, it’s all under control…