No Market Is An Island.

As we close out the quarter and prepare to head into the home stretch of a year that’s been, well, “interesting” to say the least, it’s important to remember just how interconnected markets have become.

Between coordinated central bank action, modern market “innovations” that allow everyone to have a stake in every corner of every market all over the planet, and the insidious presence of sleepless algos that are scanning headlines while you’re in R.E.M., it’s all one giant, interdependent ecosystem.

But while no man and no market is an island, Puerto Rico is – an island. Surrounded by water. Big water….

The S&P closed at a record and logged its eighth consecutive quarterly gain.

SPX

Here’s some perspective from FT:

The S&P 500 logged its sixth straight monthly rise and longest such winning streak since May 2013. That has helped push its quarterly gains to 3.7 per cent and put it on track to achieve eight or more successive quarters of gains for only the fifth time since S&P Dow Jones Indices data began in 1928.

So yeah. “Bigly”…

Here’s a look back at the quarter that was for the VIX, with spikes occurring as the world stepped closer and closer to nuclear war and the U.S. edged closer and closer to civil war:

VIX

Ultimately, we end up back where we always end up: in the single digits. And also with a record net spec short:

Vol2

September marked the first monthly gain since February for the dollar as tax reform and a hawkish Fed drove a long-awaited rebound:

Dollar

Amusingly, 10Y yields ended up pretty close to where they were when the quarter started. You’ll recall that Q3 began with the rates mini-tantrum that followed Sintra and ended with the run-up in DM yields that accompanied a hawkish Fed and tax reform “progress” (if that’s what you want to call it) in the U.S.:

Yields

Small caps have had a stellar run…

SmallCaps

…but look the most overbought in something like 14 years…

RUT

Great quarter and month for crude, which returned to a bull market this week. WTI up some 9% in September (inset is YTD):

WTI

The euro has given some back recently, but needless to say, it still had a good three months:

EURUSD

The euro’s recent pullback has helped propel European stocks, which had a good quarter despite the overall appreciation pressure on the currency:

EUROStoxxCorr

As you can see, they’re still playing catchup with their U.S. counterparts, but look to be gaining ground:

StocksEuroVsUS

Extremely amusing quarter for the yuan, which reversed course in dramatic fashion this month after staging a truly epic rally from May through August. Here’s an annotated chart for some perspective for anyone who follows this closely:

USDCNY

Here’s USDJPY and the Nikkei for September (any questions?):

USDJPYNikkei

Oh, and this is notable as it speaks to the fragility of EM from both angles (i.e. idiosyncratic risk via Erdogan’s threats re: the Kurdish referendum in Iraq and risks to EM as a group via a stronger dollar and a more hawkish Fed):

Best of luck in Q4 and here’s hoping there’s a Q1 2018 (no longer a foregone conclusion in the Trump era).

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