Markets in 3 takeaways:
1) In our previous wrap (opus 6 Evil dead...cat bounce) posted on August 29th and which, incidentally, reads QUITE well in retrospect, we wrote "herds of still bullish investors now have no other choice than accepting the fact that #us #rates, short AND long importantly, will keep trending #upwards AS LONG AS IT TAKES to send inflation back to Hell, whatever "pain" it may inflict upon the economy."
Well, pain was inflicted indeed, with Nasdaq 100 shedding 10% ever since, Dow Jones smashing previous yearly lows or US2Y T-note yield up a staggering 85 bps to 15-year highs. Ite missa est!
2) The conclusion of the aforementioned August 29th opus was: "bears are back in charge and they are likely to be particularly nervous and hungry after weeks of dearth...". Well, indeed again... But, precisely, that raises a new 10 trillion-dollar question: to some extent, haven't they been multiplying too much or too fast over the last month or so? In other words, bear overpopulation may rapidly result in starvation issues for them or, in more mainstream lingo, don't bear trends tend to be self-correcting within the financial ecosystem? And, to some extent, the less complacent you are towards risk assets, the more legitimacy you will have to at least raise the point...
3) Having said that, even though they are starting to loom on the horizon, we are not yet quite within shooting distance of most of our long-held targets e.g. #sp500 at 3200, #eurostoxx50 at 3000 or #apple at 118 (just a sample, please check us out for any details). Another way to put it would be that any bounce across risk assets should remain of the dead cat variety until the 5% on #US2Y summit is not conquered. But is that SO himalayan? Anyway, another factor that will probably pour more fuel on the flames currently engulfing risk assets is the brand new #currency #volatility variant that appeared on the Japanese #yen last Thursday and which is already reaching pandemic proportion notably on GBP or CNH. Long overdue strain of the same perennial inflation virus if you ask us! But, if you add volatility to volatility, what do you get? Well, volatility squared (as opposed to added)...
So, while you should certainly bear (sic) in mind the natural caveat described in takeaway 2, in the ongoing context mutatis mutandis, any possible bounces across risk assets will probably remain, erm... what was the word they kept using?...yes...transitory!
#AiRLAB #cutthewrap #finance #marketstrategy #markets #economy #investment #aheadofthecurve #thinkingoutsidethebox #finetank #thinktank #staytuned
Commentaires