The balancing act for buying the dip against fearing a longer tail of pain – expect the USD to be a key barometer with the present suggesting 94 is the base to watch and fear for a bigger bear dance, writes Bob Savage Tuesday.
The China shares have entered a bear market as the specter of a U.S. trade war continues with Xi promising to fight back as he gathers U.S. and EU CEOs which offset the Navarro remarks trying to diffuse the worst Trump tweets.
The central point being that trade concerns have moved beyond a negotiation tactic to a contagion of fear affecting global growth as both China and Europe vow to fight the U.S. tariffs.
Markets are unsettled and the month-end/quarter-end push for reallocation adds to the noise to signal troubles that plague a market with higher volatility and less obvious support from central bankers.
The other news today was light:
UK BOE newcomer Haskel sounded dovish and led to a reversal in the British pound (GBP).
The euro (EUR) failed from 1.1720 Asia highs.
The fourth day of U.S. dollar (USD) weaker turned and the dollar direction seems murky held up by rates and dragged down on trade fears.
The risk-off and risk-on mood swings over the last 24 hours seem to be a swing back to 2012-2014 markets but with one key difference – divergence of U.S. rate policy and dispersion mean correlations between asset classes are different.
Managers playing only with stocks against bonds will be pained by commodities and foreign exchange.
View Bob Savage at TradersExpo New York in brief video interviews recorded Feb. 9:
How to create a risk parity portfolio
Duration: 3:25
How I pick assets on the basis of highest yield
Duration: 3:31
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