The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Greenland?
Overnight futures traded down about 10 points before prices slid significantly. The S&P 500 opened down about 30 points and lost more value in a back-and-forth process through the morning. We bumped along the intraday lows in the midday, down about 70 points then. Bulls repaired about half the damage in the afternoon. Yields came in a few basis points along the Treasury curve, resulting in a flattening. Whether that’s a sign of economic/geopolitical concern or a welcome change in the bond market’s outlook, is anyone’s guess.
The bears won the session but and while the Trump rhetoric concerning Greenland is terrifying on its face, markets are mostly brushing it aside. It does seem like investors are hoping Trump will back off on the aggression and/or recharacterize what he wants in a negotiation-based framework. He’s not cooperating…yet. And perhaps that’s something causing the risk-off trades to gather momentum. Certainly if Trump gets more belligerent w/r/t Greenland and his demands, markets are going to suffer. The converse is true as well. If Trump reframes the Greenland issue as something that can be negotiated, with Denmark and Greenland, in a mutually agreeable way… well then the bulls are going to benefit. We’ll have to wait and see.
Other issues in the market are percolating as well. The credit card cap is putting fear into the financials. That issue too will resolve favorably for the longs if the 10% cap can get horse-traded away for some other desirables in the bill, like the ability to provide multiple channels for transaction processing. Anyway, until some details pop out, the fear will be present and financials will trade heavy.
Earnings season is on the back burner, for the moment. At some point, one expects that to change. Who knows what event in particular will move it to the front. It’s only a matter of time. The narrative surrounding earnings season remains optimistic. That could change but seems on good footing currently.
See you tomorrow.
-Mike
Visdom Market Commentary
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