The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Crude
Crude climbed significantly today. WTI exceeded $105 per barrel and Brent exceeded $109. Treasury yields climbed across the curve, as did the yields of all other G7 sovereigns (except Canada). Stocks felt the pressure accordingly. The S&P opened down about 10 points and spent the bulk of the day down around 40. News wasn’t terribly interesting and capital flow was very light (83%).
The light volume suggests most investors are waiting for the FOMC decision tomorrow (25 bip cut est). Those that acted today were probably influenced by the ever higher crude prices. That the yield curve seems to trade with crude in lockstep is interesting. Certainly pass-through inflation is a component of connection but not to this degree. It seems that every couple of bucks per barrel corresponds to a bip or two on the yield curve. The linkage mechanism is unclear to me but it has existed consistently for a while now.
The bottom line for us is pretty simple. The markets didn’t want to do anything but wait today. Crude forced everyone’s hand and the bond market pumped yields a bit and the stock market dropped a bit. All things considered, it was small ball today.
Will the market bounce and maybe print new highs? Will the recent downtrend gather momentum?
The FOMC decision tilts the scales considerably and should send us one way or the other.
See you tomorrow.
-Mike
Visdom Market Commentary
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