Following Friday's shocking Fed crackdown, Wells Frago stock is reeling on Monday morning, tumbling as much as 9%, its biggest intraday drop since the August 2015 ETFlash Crash.
In the traditional post-payrolls data lull, traders will pay attention to central bank meetings out of the UK, Australia and New Zealand, the US non-mfg ISM and the swearing in of new Fed chair Jay Powell.
Global markets were routed for the second day in a row on Monday, with Asian and European indexes opening lower and bond yields rising as resurgent U.S. inflation raised the possibility central banks would tighten policy more aggressively than had been expected.
Three weeks of equities down,10y yields up, has not happened for more than a decade. The bad news, is the markets may be contending with a shift in two big macro factors that point to a change in the post-2008 world.
For anyone that has studied the sequence of events leading up to the Global Financial Crisis (“GFC”) of 2008-09, it would not be hard to put together the shape of the new crisis.
With the 10y jumping 43bp since the start of the year, investors have begun to question how much convexity-related selling could result from the extension in mortgages.
"... the resultant rise in bond-equity correlation would likely induce de-risking by risk parity funds and balanced mutual funds, magnifying the eventual equity market sell-off."
Markets are in an uncomfortable spot, where not much escape is available via new lending, not much escape via higher valuations, not much escape with new QE, not much escape with more leverage, not much escape with more cash to deploy.
Not sure what it means that this sage marmot reholed himself today just as the Dow fell an ominous 666 points, but pretty sure it does not mean spring is here for the economy.
Wells Fargo may be Warren Buffett's favorite bank, but the endorsement of America's favorite benevolent plutocrat hasn't spared it from an unusually severe punishment (as far as too big to fail banks go)...
"Ominously, we’re now in the deregulation stage following the bull run. We know what comes next, just not when. Count on one thing: it won’t be pretty. "
While Bitcoin has bounced back above $9,000 miraculously today, after its early collapse, if Deutsche Bank's Masao Muraki is right, VIX's spike is signaling cryptocurrencies have a lot further to fall...
