It was a week that saw Mario Draghi cling stubbornly to ultra-dovish monetary policy, the UK’s Brexit strategy thrown into even greater disarray after Prime Minister May’s failed election gambit, and the former Director of the FBI essentially testify that our President is a scoundrel.
It’s not quite 1999 at this point, but it’s been moving in that direction.
Marie Diron, Moody’s associate managing director, Sovereign Risk Group, commenting Wednesday on Moody’s Chinese downgrade (Bloomberg Television): “It is likely to be a very medium-term and gradual erosion of credit metrics and we are looking at the policies that the government is implementing.
There was little market reaction to Emanuel Macron’s widely-anticipated big victory in the French presidential election.
We’re at an important juncture for the global Bubble. There are growing divergences and anomalies. Market signals are increasingly conflicting and confounding: European equities in melt-up and U.S. markets at record highs, while China falters. Bond yields rising and commodities sinking.
With Emanuel Macron and Marine Le Pen moving on to next Sunday’s (May 7) runoff French presidential election, first-round results proved right in line with the polls. One would typically expect “as expected” results to elicit minimal market reaction. But we live in the age of derivatives, hedging and speculation.
A strong case can be made that Q1 2017 experienced the most egregious monetary stimulus yet.
Global “Risk Off” has been making some headway.
An intriguing first quarter. The year began with bullish exuberance for the Trump policy agenda. With the GOP finally in control of Washington, there was now little in the way of healthcare reform, tax cuts/reform, infrastructure spending and a full-court press against regulation. As Q1 drew to a close, by most accounts our new Executive Branch is a mess – the old Washington swamp as stinky a morass as ever. And, in spite of it all, the global bull market marched on undeterred. Everyone’s still dancing. From my perspective, there’s confirmation that the risk market rally has been more about rampant global liquidity excess and speculative Market Dynamics than prospects for U.S. policy change.
Market focus this week turned to troubled healthcare legislation, with the GOP Friday pulling the vote on the repeal of Obamacare. This “Republican Catastrophe” (Drudge ran with a Hindenburg photo) provided a timely reminder that Grand Old Party control over the presidency and both houses of congress doesn’t make it any easier to come to a consensus for governing a deeply-divided country.