Why One Trader Thinks Markets Are About To Have Another Swoon

By Mark Cudmore, former Lehman trader and current Bloomberg macro commentator.

Macro View: Equity Markets Are Likely to Have Another Swoon

Almost all the most important inputs point to lower prices for global equities before the bulls can regain control.

Volatility across assets remains elevated. Importantly, the VIX can’t fall back below the crucial 15 level. Feb. 2 saw the fear gauge close above that mark for the first time in more than five months; it’s has managed to close below only once since. Long-term moving averages of swings continue to rise and that constricts risk-taking limits at financial institutions and erodes investor conviction.

Liquidity is still being squeezed. The rise in Libor may not be related to any bank stress but it still amounts to dearer funding costs. Two-year U.S. yields are at the highest since before Lehman Brothers collapsed. The 3% yield level may have held for 10-year Treasuries but they are hardly rallying rapidly.

Credit, both investment grade and high yield, continues to trade poorly, a reflection of diminished liquidity across markets and a fundamental outlook that’s less than appealing.

Global trade tensions will remain elevated for at least another few weeks, while we await the U.S. decision on China intellectual property theft and then the Treasury’s April report on FX manipulation.

Global political risks continue to mount: the personnel turnover in the U.S. administration, Japan’s land scandal, lack of Brexit clarity, Italy’s struggle to form a government, Russia’s spat with the U.K. are just some hot-button issues.

The recent broad losses in commodities constitute a warning signal on China - it doesn’t matter whether it’s a reflection of financial deleveraging or a negative outlook on the real economy - particularly as industrial metals are leading the declines.

Global growth may be solid but it’s hard to see where the upside for earnings growth is going to come from in the context of the large upward revisions early this year and also the looming threat of increased protectionism.

I turned bearish on global stocks in this column on Jan. 31, and have since repeatedly said that equities won’t find a solid base to bounce from until yields cool, investors deleverage and bears prowl openly. There are signs of the last requirement but the deleveraging seen has been insufficient relative to the level of U.S. yields.


Davidduke2000 Mon, 03/19/2018 - 06:19 Permalink

one trader is only one, the rest of them are part of the fraud that have been going on for decades.

as long as the us, uk, eu, japan keep printing money at will without collateral , the fraud would continue until we hit zimbabwe level of corruption.

StephenHopkins Mon, 03/19/2018 - 06:25 Permalink

When is the right time to hang everyone on the federal reserve board? It’s close. Anyone affiliated, married to, related to that leviathan: deserves rough music before they’re tarred and feathered. End the Fed!

nmewn Mon, 03/19/2018 - 06:44 Permalink

So, back on this John "The Trotskyite" Brennan tweet...

John O. Brennan‏Verified account @JohnBrennan

John O. Brennan Retweeted Donald J. Trump

When the full extent of your venality, moral turpitude, and political corruption becomes known, you will take your rightful place as a disgraced demagogue in the dustbin of history. You may scapegoat Andy McCabe, but you will not destroy America...America will triumph over you.

...it's not like I even believe this communist has anything earth shattering to say or he would have already ran screaming to Mueller like the cuck he is...but...he was the Director of the CIA. He does not get to reveal, disclose, personally profit, dream up or manufacture "evidence" he say's he gleaned via his former position. 

You are just one man, John. This is a nation founded on the rule of law, not royalty, titles, gentry or station. 

You chose to abuse your position of responsibility for purely ideological reasons, throwing your lot in with the FBI, DoJ & Alinsky Media in covering up Obama's & Hillary's malfeasance in office. You broke your oath to all of us, John.

This nation has already survived all of you. 


Addendum...and we remember you and your cronies hacking into State Department passport files (Obama for one!) back in 2008, you fucking commie.


Let it Go Mon, 03/19/2018 - 06:56 Permalink

As of 2015, just 30 firms accounted for half the profits of all publicly-listed U.S. companies, down from 109 in 1979. Only by accumulating debt have many laggards been able to afford the buybacks necessary to keep stock appreciation stable. The IMF warned last year that 22% of U.S. corporations are at risk of default if interest rates rise.

Below is the link to the second part of a two-part series. The first explored how stock buybacks have been instrumental in driving this market higher since QE fueled easy money starting in 2009. This part focuses on what is ahead and how the recently passed Trump tax plan has supercharged this trend just as it may have been reaching its natural conclusion.

 http://Stock Buybacks Driving Market-Where It Might Take Us!html

bigloser Mon, 03/19/2018 - 08:57 Permalink

Futures are way down this morning. The market could open lower and stay down all day over two factors:

1. Rate hike certain on Wednesday (big mistake)

2. Total chaos in Washington, DC. There's an active coup attempt by Brennan, Clapper, Mueller, Comey, et. al. involving dozens, maybe hundreds of high-ranking people.

You can add in the obvious overvaluation of many stocks, the length of the bull market, sketchy economic data and of course, the possibility of war with Russia as sub-issues.

There's absolutely no catalyst for a rally; stocks need a major haircut. Got a good start in February and March seems to be following through nicely.