The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Bouncing bonds
Overseas markets were mixed and our futures were down a bit. Crude oil traded up significantly during our premarket. Yields climbed across the curve early too. The US 10-year yield climbed above 5%, a significant headline-grabbing event. Additionally, concerns about the power of AI are driving ideas behinds slowing down AI development. The AI-themed stocks fell accordingly. Over the day, yields eventually dropped across the curve and stocks caught a bit of a bid around the same time. Yields turned around intraday though and finished mostly positive across the curve. The intraday rally in stocks didn’t sustain itself and the S&P finished with a slight decline. Capital flow remained light, 94%, but is climbing up from summer levels.
The mix of news today is a bit different than usual but markets didn’t react too greatly. The back-and-forth in the Treasury market is a bit odd but it may be driven by huge positioning considerations. Short positions in many sovereign bond markets is a very popular/crowded trade among CTAs and hedge funds. Perhaps today’s action was an intraday short-covering rally?
The Fed decision on Wednesday remains the primary focus of major markets. The futures market now prices in a 92% chance of a hike. Investors are presumably ready now. The hike itself is unlikely to make waves but the statement and subsequent press conference will be key. Whatever markets *think* they are learning from those communications, will move prices significantly. Considering that Warsh is a new Fed Chair and that the Fed has significantly changed under his leadership, it’s anyone’s guess as to how markets react to whatever is written and said.
The old Fed-speak playbook will be of little use on Wednesday. How will markets react? I don’t know. I get the feeling everyone will be flying by the seat of their pants.
Until we learn the FOMC’s decision Wednesday afternoon, my suspicion is that markets will be quiet. There’s no sense in front-running something so important when the market doesn’t have a clue about it.
See you tomorrow.
-Mike
Visdom Market Commentary
IMPORTANT INFORMATION
This is general educational information and market commentary and is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.
All market and economic data herein is as of the date hereof and sourced from Bloomberg unless otherwise stated. The information is subject to change without notice and we have no obligation to update you.
This general market commentary is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other employees of Visdom Investment Group LLC ("Visdom") and Visdom. Past performance and any forward-looking statements are not guarantees of future results. It is not possible to invest directly in an index.
We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. Any securities referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Visdom or by the author(s) in this context. The information presented is not intended to be making value judgments on the preferred outcome of any government decision. This information does not constitute Visdom research, nor should it be considered a recommendation of a particular investment strategy or an offer or solicitation for the purchase or sale of any financial instrument. Investing involves market risk, including the possible loss of principal. You should speak to your financial advisor before making any investment decisions. Visdom and its affiliates do not provide legal, tax or account advice so you should seek professional guidance if you have questions.
