Equites lacked direction as potential risks from tariffs to inflation to geopolitics weighed on prices.
Most will agree that the Administration’s aggressive agenda is more of a headline narrative rather than a market driving narrative, perhaps from the realization that there has been more jawboning than actual policy.
FRB Chair Powell has made similar observations when asked about tariffs, the response to which was there is “no response” given the lack of actual policy.
Bank America published the results of a survey that indicates that investors are at the “biggest willingness to take risk in 15 years,” perhaps a direct contradiction to the nervous narrative that has been espoused over the past several weeks.
Moreover, the survey indicated that fund managers’ cash levels fell to the lowest also since 2010, with the authors of the report stating, “investors are long stocks, short everything else.”
Perhaps a direct contradiction to the above is that 89% of the respondents indicated that US equites were the most overvalued since at least April 2001.
Wow! Talk about cross currents.
Treasuries fell in price yesterday with yields increasing across the spectrum. Perhaps a Bloomberg headline encapsulated the current environment. It read “Treasury yields look to be at the bottom of arrange between 4.50% and 4.80% that has proven difficult to sustainably break from.”
The article stated that inflation has been stuck in a narrow range “considerably higher than targeted levels.” Tariffs have been “more bluster than fact.” And growth has been “consistently stronger” than expected.
Stepping back, one can find ample evidence to support one’s preconceived views. Perhaps the most subjective person is the one who declares that he is objective. We all have preconceived biases and narratives and given the lack of any gate keepers, one’s views can be easily validated via today’s massive echo chamber of social media.
Ultimately however, reality will return, the biggest of which is that the country is on a path of fiscal difficulties via unsustainable spending, a view that is shared by many market and central bank leviathans including FRB Chair Powell, JP Morgan’s CEO Jamie Dimon and Oak Tree’s Howard Marks.
It has often been opined it will take a crisis to address fiscal issues. Hopefully this will not be the path today.
Last night the foreign markets were down. London was down 0.41%, Paris down 0.72% and Frankfurt down 0.77%. China was up 0.81%, Japan down 0.27% and Hang Seng down 0.14%.
Futures are little changed as the Administration is threating more tariffs. The 10-year is off 4/32 to yield 4.57%.
