"No News Is Good News"

For the latest in market sentiment as we open yet another week at all time S&P highs, here is a take by Mark Cudmore, former FX trader who writes for Bloomberg.

No News Is Good News

Markets are trading positively and the drivers suggest that further gains can be made in the short-term.

The media may refer to the Trump-Abe bromance, but the fact of the matter is that this week’s strong start to markets isn’t driven by any particular positive catalyst. The two leaders delivered no surprises.

Instead, this rally is largely based on the absence of new negative catalysts. The fact that Trump met another major world leader and didn’t create an international incident is now a notable event.

Following on from last week’s apparent rapprochement with Xi Jinping, investors are suddenly attributing a lower probability to the U.S. disrupting global trade and following an isolationist path. This has been enough to bring cash in from the sidelines as investors chase higher prices in equities and emerging markets.

And the ensuing technical breaks across assets mean that even the cynics won’t be tempted to fight these moves, yet.

Yellen’s testimony on Capitol Hill is another risk event on the horizon but, with 28% probability of a March hike priced despite still subdued inflation, it’s very likely to prompt a further boost to asset prices.

The theme of this week could be a lowering of the Trump risk-premium. It may very well flare up again in the future but all long-term sustainable trends go through healthy consolidation periods. No sense in fighting the positive sentiment this week.