Monday morning and the reaction function of writing new ideas on an old computer conspired to break the deadline. Big hopes dwindled into a harsher, slower reality, writes Bob Savage Monday. He's presenting at TradersExpo New York March 11.
The here and now continues to drift into a bearish winter drizzle as the there and then of 2018 hangs over the market blurring any forecasts for sunshine and growth.
There are always surprises to consider in the space between now and then with technology the first risk for bears while the forces of demographics and fear of radical change block the bulls. This is a market stuck waiting for something new and different.
The illogical inconsistencies roll on – with oil up 2% and European equities lower even as the news overnight was mixed. Retail sales better, German factory orders worse, Australian and Japan PMI reports weaker while German construction better.
The Sentix report on investor sentiment captures the present mess best with global downturns and dire warnings on policy makers to respond. The central bank reaction function remains the key doubt driving fears for 2019. The trust of the market in Powell’s new found “patience and flexibility” and renewed focus on financial conditions may change like the time.
There is a feedback loop inherent in data-dependency, which kills volatility. The role of the USD weakness in the present situation can’t be ignored. The U.S./China trade talks have started this week with a rush of “good faith” and hope for further reversion to market norms with emerging markets the clear winners so far in 2019. However, today’s capital flows don’t mean future easy returns.
The euro/U.S. dollar (EUR/USD) relationship and the role of ECB vs. FOMC policy responses will be central in the week and month ahead.
Fed speakers will lead this week along with the U.S. need for capital with the 3-10-30-year bond sales. The risk of a EUR breaking 1.1470 and running to 1.1650 entices but the reality of the future rests on Draghi and his replacement as they deal with their own QE unwind.
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