Via Bloomberg's Richard Breslow,
Yesterday, the markets looked down the barrel of bad news and concluded that the gun was not yet loaded. The conclusion was reached that the glass remains at least half full...
A day that ran red through two time zones of death by a thousand cuts of unsettling news bites turned decidedly green as North America came in.
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The fund industry has been raising cash at a very quick rate. Prudent if they believe things are going to get worse quickly. If markets stabilize or rise, this cushion suddenly feels like unproductive weight which will just lead to yet another period of under performance to their benchmarks
Interestingly enough, the market that seemed to react quickest and earliest yesterday was India’s Sensex Index. The morning meme was a horrible export number, red equities the world over, weighing further on this underperforming index
Then the tide of sentiment began to change among market participants. Yes, the FOMC is due but nothing is imminent and how scary can it be? Greece, well that isn’t for today, they have a little time to sort it out. Inflation, yes it’s been intractable but look at those sheets of rain. And indeed, with apologies to Eric Clapton, the love did rain down on the market and buy orders flooded in. Today’s headlines now read “India’s Sensex Headed for Longest Stretch of Gains in Two Months”
Computers all over the world must have been asking (in ones and naughts) what do they know that I need to know? The answer was I should put some of this cash back to work. The band, after all, is still playing...
The Sensex example is an important one, as looking at only a few assets in these very global markets risks missing the big picture and what might leap up to affect your positions. You can be sure the correlation matrices in those computers didn’t miss it
The Greece saga continues.
This is a story that does not deserve to be derided by whines of “I’m sick of reading about Greece” and “If it weren’t for Greece”, blah, blah, blah. The next B level economic number that HFT traders can jump on is not more interesting nor important. This is a Western democracy, member of NATO and the euro zone in the throes of social and economic revolution. Their problems go to the very heart of EU problem resolution ability and, in the best case scenario, could lead to the fiscal union measures that finally make the EUR truly viable.
On the other hand, it could all go terribly pear shaped, threatening political stability and the balance of power on the continent.
Today is the Fed’s day, but don’t dismiss this story for small mindedness.
As for the Fed, given the players calling the shots, I think, like most, cautiously upbeat, data dependent, slow and careful, but leaving the September option open. And markets will have little reason to quake.
