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Fund Managers Flee To Cash Just As Policy, Trump ‘Puts’ Kick In
As the S&P careened sharply lower last month amid incessant trade escalations and the daily exchange of recriminatory rhetoric between Washington and Beijing, investors were once again forced to ponder when the vaunted "Fed put" would kick in.
Presumably, the Powell Fed became more protective of risk assets in 2019, having seen enough turmoil during Q4. At the same time, market participants assumed the "Trump put" would likely kick in sooner or later, where that means that past a certain th
The race to the bottom (rates / currency realignments ) is now in full ahead mode… The attempt to engineer an equity rally is now in full ahead mode…. The voices of sanity have plain run out of things to say….Guess we just watch the rest of this movie…
Exactly one year ago, on the 14th June 2018, the ECB triggered a rally like today when it announced that no rate hike was in sight before September 2019. Dax made +3.5%. That was the last Dax roaring, since that day it kept drifting lower the whole summer, and before the 2018Q4 meltdown it was already down 8% from ATH.
I’m not saying Dax will go down in the same way from tomorrow. What I state is that all the ECB dovishness had not been enought to offset the deterioration of Chinese fundamentals, and the partially linked auto tariff issues. Indexes now can be supported by expectations that a new QE is taking off, and make even new all time highs in the next weeks. We know that the mechanical effect of QE on stocks is debated, it probably acts on assets more through beliefs and expectations. But what matters is to see if China is able to reengineer a serious recovery. And if EPS in the ndx/spx don’t increase either we have a bubble followed by a crash, or stocks will keep struggling to break decisively current levels. After all since 18 months indexes keep bumping against these levels and then retreat. In the eurozone the overnight – one month euribor is almost 40bp negative. Excess reserves range from 600bn to one trillion daily. Banks don’t lend, borrowers have no viable project, and there is no credit demand. Some banks instead of paying the ECB rate on excess reserves buy bunds at are pushing their yield at the same euribor rate or that rate charged by the ECB on excess reserves, still 40bp negative. This is not a sound economy. Central banks are scraping the bottom of the barrel. If they fail even now, we will see a very bad bear market in 2020-2021. July earning season will tell us more anyway.
I was wrong , the voices of sanity have not run out of things to say…Nice analysis Franceska
I agree with George. Nice analysis Franceska!
This is definitely feeling like 1999 and 2009.
Only without the sock puppets and no-docs.
Indicies back at highs, year to date gains respectable for full year, sell-in-May seasonality, increasing volatility, some econ indicators turning down, bond market warning signs: derisking looks prudent even if that means briefly underperforming should “puts” trigger.