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Charts From ‘Black Friday’ In The UK
Via Alpha Exchange. Get the podcast here
Black Monday (10/19/1987), Black Tuesday (10/29/1929), Black Wednesday (9/16/1992), Black Thursday (10/24/1929) and Black Friday -- when Amazon sells stuff cheap. Or is it now 9/23/2022 in the UK?
The following charts serve as a visual retrospective for a historic day of wrong-way vols and correlations.
Since 2012, there are three days when the UKX (FTSE100) and GBP are both down 2%. They are: Brexit (6/24/2016), the pandemic liquidation (3/18/2020)
“In the US, the dollar and the S&P 500 remain negatively correlated — a weaker dollar “helps” the SPX.” I have observed this for years and always wondered why. What is the mechanism that links the dollar to the SPX?
I can think of at least 3 things.
2) A weaker dollar makes American exports cheaper so American companies will sell more and
Oops.
1) The SPX is valued in dollars, so a weaker dollar means it takes more dollars to represent the same intrinsic value.
2) A weaker dollar makes American exports cheaper so American companies will sell more and have higher profits.
3) A weaker dollar lets people from around the world buy more American equities with the same amount of their local currency.
It’s a correlation and not a causation. Both respond strongly relative to interest rates, where the causation is clearer:
Higher rates make stocks worth less
Higher rates strengthen the dollar
The UK’s political leaders have been making a strong case for Communist Party rule.
Next thing you know they’ll be diluting the UK’s global influence and taking a wrecking ball to London’s status as a leading financial center while gutting the UK’s immigrant-led economic growth by leaving the EU. At least by staying in the EU they can defuse Scoxit. But wait …
I have no problem with Truss dressing up as Margaret Thatcher as long as they reopen The Haçienda.