Something has definitely changed in the market: while for the past seven years (a period largely coincident with an easy, ZIRPing or QEing Fed) every day would be greeted with numerous research pieces, all urging traders to buy the dip, and to otherwise stay invested in stocks, now all the equity firms have turned their back on the S&P, and first Goldman, then JPM, then UBS, then every other equity trader has urged clients not only not to BTFD any more, but to STFR.
So having been so rudely abandoned by equity analysts, perhaps dejected stock investors could find some solace in the Treasury analyst community?
Alas no: as Bloomberg notes this morning, citing independent Treasury strategist Marty Mitchell, "our concern is that things will only get worse (effects of commodity super-cycle, bankruptcies, debt defaults, hedge fund redemption/failures, global economic slowdown, equity weakness, global debt deleveraging, etc, etc) before they get better."
His suggestions: "The underlying bid in the bond market will be with us for awhile," adding that "strength in the bond market isn’t only about safety as global fundamentals and structural changes in China’s economy and in the energy sector are depressing yields as well."
He concludes with a refrain that has been music to equity investors' ears, at least until now: "buying on dips, when we are fortunate enough to get them, is the most prudent strategy."
One problem: he is referring to Treasury dips, not stock dips.
Some other observations from Treasury strategist morning notes courtesy of Bloomberg:
BMO (Aaron Kohli): “Morning session thus far offers us precious little change in the tone of the market and very little reason to doubt the momentum that has prevailed for the last few days”
- “One of the more important data points this week will be the Retail Sales number out tomorrow, which will dictate to some extent whether the market’s lack of confidence is being mirrored by the consumer”
CRT (David Ader): “While we worry over the disinflationary things going on globally, we still think inflation will pick up due to base effects in the coming months and –- we say this with decreasing confidence –- spook the bond market”
- “We don’t doubt that Treasuries are getting into overbought territory,” however “market is doing nothing wrong and we won’t second guess that until, well, it does and then go-with what we suspect will prove merely a tactical retreat”
FTN (Jim Vogel): “Balance of risks suggests a potential 8bp decline in 10s -- unless the Fed really did make a mistake in December -- vs a potential 20bp increase if stock declines are more madness than method”
- “Most portfolio managers should continue to invest gradually while targeting the type of bargains that typically become available if there’s a sharp sell-off”
RBS (John Briggs): “Treasuries are overbought near term, but continue to rally”
- Neither yields, commodities, nor equities “have shown some of the classic reversal signals that would give us, and investors, price action to lean on”
