Goldilocks

SocGen Asks: "Is It Groundhog Day, Or Goldilocks And The Three Bears?"

"Weak productivity and weak real wage growth leave the economy in an endless winter of mediocrity, while solid employment growth without inflation is the ‘not to cold, not too warm’ mix that keeps the Fed normalising policy ever so slowly, equity indices marching ever higher and the economic cycle able to trundle on with no recession in sight."

Goldman Sachs On What Happens Next - Recession, War, Or Goldilocks

After several months of low volatility across assets since mid-2016, particularly in equities, markets were more volatile last week owing to fears of central bank tightening. Volatility picked up first in FX and rates, and then spilled over to equities. However, as Goldman notes, this might not be the end of the low vol regime yet.

The Fed's Third Mandate Is Official

"The FOMC wants stocks to stop rising, and they will keep raising rates until they stop... It is stunning that markets are not taking these words more seriously..."

Signs Of Excess: Crowding & Innovation

It is not until very late in the “bull market” cycle that individuals return to the “casino.”  Of course, this is after a long period of being chastised by the mainstream media “for missing the rally” and admonishing advisors for not “beating the market.” Everyone should just buy an index fund because “this time is different” and there is an overwhelming perception that there is “no risk” of chasing “risk.”

An Open Letter To The Fed's William Dudley

"Let’s face it... The Fed can’t hold the financial order together much longer anyway. Why pretend you can with utter nonsense like crashing unemployment? It’s insulting...Your credibility’s shot..."

Prepare For A Surge In Volume: Russell Rebalance Day Is Here

Welcome to the one year anniversary of the Brexit vote. Welcome also to the annual Russell rebalance, traditionally one of the busiest trading days of the year: last year's rebalance helped propel a near record turnover of over 15 billion shares. In fact, in four of the last five years, reconstitution day ranked in the 10 busiest trading sessions.

A Record Number Of Market Participants Says The Market Is Overvalued, Surpassing 1999 Bubble Highs

The latest monthly Fund Managers (FMS) survey from Bank of America is out, and continuing the trend noted in previous months when the number of active managers who said that stocks are overvalued hit the highest in nearly two decades, the latest version reveals that the number of respondents saying that equities are overvalued has just hit a record high, surpassing the all time high set during the 1999 bubble.

RBC Warns Equity Markets Have Entered The 'FOMO' Stage

It’s risk-parity heaven right now, notes RBC's head of cross-asset strategy Charlie McElligott, with global equities (developed and EM) AND fixed-income all continuing their torrid rallies, but McElligott warns this is a classic "from worst to first" PM-grabbing into a new "Fear Of Missing Out" stage of the equities-rally.

"The Western Status Quo Political System Is Collapsing Into 'Something Else'"

"...as the Western status quo political system collapses into Something Else, how is it possible that our capital markets are not similarly gripped by volatility and stress? What is responsible for breaking the transmission mechanism from political risk to market risk? I’ve got a macro answer and I’ve got a micro answer..."

RBC: Welcome To "The Insanity Loop"

"It's a classic 'pennies in front of a stream-roller' / 'negative skew' return profile - a Taleb distribution...The problem is….IT KEEPS WORKING, because market expectations for rates / curves / inflation expectations remain D.O.A., which perversely keeps the major global central banks 'reflexively easy'..."

Cudmore: "I’m Failing To See Why Dip-Buyers Aren’t Correct"

"U.S. equities are more likely to melt-up rather than melt-down in the short-term. Too many investors seem obsessed with the fact that U.S. stocks are "expensive" and "overvalued" when compared to historical metrics. I’m not disputing those statements. But when there’s an unprecedented amount of liquidity in global markets, then valuations at unprecedented levels don’t seem completely illogical."