‘I Suppose You Think You Raised Hell’

So U.S. stocks could have done without the “Mueller indicts 13 Russians for conspiracy to defraud America” headline, but other than that, Friday was a fitting close to the second-best week for equities since 2011.


To be clear, no one was able to offer a satisfactory answer as to why stocks suddenly are immune to the very same inflation worries that triggered February’s market turmoil and threaten to push 10Y yields beyond 3%. This week brought still more evidence that price pressures are building as the closely-watched CPI print beat and Thursday’s Fed surveys and PPI data told a similar story.

For the time being, it appears the BTFD mentality and the notion that the systematic selling is behind us were enough to assuage fears and underpin a “bigly” bounce for stocks. Again, this was the second-best week for U.S. equities since 2011.


While there are undoubtedly a handful of folks out there like who are feeling vindicated after the correction and the short vol. blowup, I can’t help but think that the ardent bears are feeling a bit like Gabriel Byrne from the classic Coen brothers mob film Miller’s Crossing. At one point, he smashes a mirror in a room while arguing with his lover only to have her simply brush him off completely – “I suppose you think you’ve raised hell”


That’s where you find yourself now if you’re a bear. Looking at the mirror you broke and swearing that “when you’ve raised hell, the bulls will know it.”

Treasurys trimmed weekly losses on Friday, as 10Y yields pared some of the post-CPI advance but as noted above, we’re not out of the woods on the bond selloff yet, especially with lingering questions about foreign demand.


The VIX pushed back above 20 on Friday following the Mueller headline. Here’s the big picture:


The yen was of course the big story in FX land this week, as USDJPY fell below its 2017 low and multiple officials were effectively forced to either comment or refuse to comment which is of course the same thing as commenting. FinMin Taro Aso said he’s “watching” and noted that the government will intervene “when needed” while senior FX policy bureaucrat Masatsugu Asakawa called recent FX action “one-sided” before noting that Japan will “act appropriately, in line with G-7 statements.” This is the situation:


The dollar continues to confound, after falling sharply over the course of the week despite rising yields. The going assumption is that worries about the fiscal outlook in the U.S. are the overriding concern. The greenback did get a reprieve on Friday, rising for the first time in five days, but on the week, it wasn’t pretty. It would appear the February bounce off the January massacre lows is over:


Folks are talking about bond fund outflows after the first simultaneous exodus in IG, HY, and EM credit funds since the U.S. election. Here’s the cumulative picture for the week through Wednesday:


And the focus is on LQD, which suffered its biggest single-day outflow in history on Valentine’s Day:


The second largest outflow in history from HY funds (through Wednesday) didn’t matter for HYG in terms of performance. Best week since February 2016:


Good week for oil, which closed things out near one-week highs as the weak dollar supports:


Best week for emerging market equities since early 2016:


Ray Dalio is short a bunch of shit in Europe and that might have been painful this week:


China closed early this week for the long holiday and notably, the Nikkei fought off the yen strength to close the week higher by 1.6%:


This is funny: net purchases of Japanese stocks by individuals rose to a record in the week ending February 9, which means people were buying fuck out of the dip over there.

Finally, for your Friday moment of zen, Sarah Huckabee Sanders hasn’t spoken with “him” specifically about “that” where “that” means whatever it is you’re asking about…

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