However, there are plenty of ways to prepare for whatever comes next….
“Something Wicked This Way Comes” : by Tyler Durden
Lots of news across markets this morning. If anyone has views on football, let me know — I might try to write something for Friday? More significant is the current vaccine news-flow — and article source it means for global reopening, trade and growth. What I also detect is a growing sense of how much longer markets can stay on this roll…. They are probably wasting their time looking for detail in single stars or constellations.
They would be better to pick a big patch of the sky and watch. Meteor showers, which occur as the earth passes through the tails of old comets can pretty much be predicted. It hints that can have an inkling of timing Something Wicked This Way Come Analysis direction from whatever bas things might be coming towards markets. Markets are about sentiment — understanding its direction can give a good idea of what may happen. Sure, there are multiple sentiment indices to peruse and ponder, but I prefer asking folk I know about what is bothering them.
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Talking to a number of fund managers yesterday, most agreed the market seems due some kind of correction — it is just too perfectly priced for perfection. As prices make lower highs and higher lows, there is a definite feel momentum is slowing. Not everyone is panicking. Some think the market is priced for a period of flatline activity, taking a breather before ultra-low interest rates and the sheer volume of money pumping into financial assets triggers a resumption in the stock upside.
Global trade is recovering. Supply chains are being re-established. There are an increasing number of money managers hedging the current market by going back into bonds — extending duration to juice returns and beat inflation at the long-end — taking the view bonds will rally on the back of any equity correction. Others think the trick is http://pinsoftek.com/wp-content/custom/summer-plan-essay/introduction-and-importance-of-communication.php buy bonds ahead of the sell off, expecting central banks will intervene to stabilise markets if stocks slip, and then exit quickly to re-invest in the inevitable stock price recovery.
Other folk are keeping a weather eye on inflationary signals — a good reason to exit any concept of a bond hedge. But Sometging would it mean for stocks? Without the oxygen of ultra-low rates will equities continue to rally?
In an inflationary environment driven by growth — stocks are good. But if we see an over-hyped post-pandemic recovery slow into recession plus inflation; Stagflation — a distinct possibility if the recovery gloss wears thin — then where is all that money going to go?
That makes sense as Central Banks look to normalise rates. When we see rates start to rise — it spells massive pain for over-indebted zombie junk, triggering all kinds of consequences for economic growth. And, Central Banks may not be that concerned about inflation — a few years Wwy modest inflation could inflate away significant amounts of their burgeoning national debt. Article source — where to put money instead?]
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