Politicians aren’t usually the most consistent or reliable members of society, so markets get difficult when prices are driven by political headlines.
After a painful Friday session, equity futures are pointing sharply higher Monday morning on news that negotiations designed to avert a trade war between the U.S. and China are underway,
“Treasury Secretary Steven Mnuchin said he’s optimistic the U.S. can reach an agreement with China that will avert the need for President Donald Trump to impose tariffs on at least $50 billion of goods from the country. ‘We’re having very productive conversations with them,’ Mnuchin said on Fox News Sunday, when discussing talks with China. ‘I’m cautiously hopeful we reach an agreement.’”
“Mnuchin ‘Hopeful’ Truce Can Be Reached With China on Trade” – Bloomberg
“U.S., China Quietly Seek Trade Solutions After Days of Loud Threats” – Wall Street Journal
“China holds fire on imposing US soyabeans tariffs” – Financial Times
I have followed the pseudonymous Macro Man website long enough to believe that the author is actually a credible market insider.
The most recent post argues that the most recent bout of market volatility signals a ‘regime change’ after which the momentum investing style will no longer lead markets,
“All we know for sure is that the momentum trade is dead … I believe the market saw a regime change with the … [short-volatility] implosion trade that started at the end of January. That crushed the momentum traders--and to make matters worse, there have been a couple of times where it looked like stocks were finally going to get on the canvas and start trading like 2017 again--only to fall into another 50 point [S&P 500] intra-day death spiral.”
This is only one investor’s opinion and I hope it’s wrong. The back side of momentum rallies tend to be extremely painful, primarily because momentum investors pay almost no attention to valuation levels while driving market leaders higher.
“This is what it sounds like...when the regime dies” – Macro Man
“@DavidSchawel BAML’s Hartnett: “... in 2018 peak Positioning, peak Profits, peak Policy stimulus mean peak Wall St returns” – (Research excerpt) Twitter
Unlike equities, energy markets are seemingly unaffected by global politics this morning,
“Brent held near $70 a barrel after Saudi Arabia intercepted multiple ballistic missiles fired by Houthi forces in Yemen.
“Futures in London were little changed, after earlier rising as much as 0.9 percent on speculation a worsening of the situation with Yemen could lead to supply disruptions in the Middle East. That countered sentiment from last week, which saw the biggest drop in U.S. equity markets since January 2016 and a rising number of rigs being put to work in America.”
“Brent Holds Near $70 as Middle East Tensions Offset Stock Slide” – Bloomberg
Tweet of the Day: @SBarlow_ROB Citi: “now would be an especially poor time to conclude that fiscal boost is prematurely running out of steam.” – (research excerpt) Twitter
Diversion: “Apr. 14, 1931 - Scenes at a Yankees vs Red Sox Game, NYC (real sound)” – (video) Youtube