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.
On Wednesday the US central bank sent a clear message to markets that it is not in a hurry to tighten monetary policy.”
New Fed Q4 Z.1 Credit and flow data was out this week. For the first time since 2007, annual Total Non-Financial Debt (NFD) growth exceeded $2.0 TN – a bogey I’ve used as a rough estimate of sufficient new Credit to fuel self-reinforcing reflation.
How about a cursory look at recent economic data
Market Dynamics continue to frustrate many hedge fund strategies. At this point, Europe remains at the epicenter of The “Risk On”/“Risk Off” Faceoff.
Like so many things in The World of Finance, we’re all numb to Chinese Credit data:
Behind every consequential Bubble is an inflation in underlying Credit.
It’s not the first time that a non-farm payrolls rally wiped away inklings of market anxiety. Coming early in the month – and on Fridays – the jobs report typically makes for interesting trading dynamics.