EUR 8.70 For Business Accounts Only

The Morning Track wall-of-worry

- The Morning Track - Wall of Worry by Bob Savage
http://trackresearch.com/articles/the-morning-track-wall-of-worry/

If we learned anything about February it was that the wall of worry can be climbed. The question is whether the degree of difficulty in the March ascent matters. Did we have a slip and need to start over? The barometers most use to sniff out trouble tell us to go home or rather stay home, remain in cash and wait, or buy protection - JPY below 105, US bond spreads (A or BBB) are wider, VIX touching 20%. The brave (not to be confused with the stupid) are looking at the dip and seeing an opportunity. The 5% fall in the Nikkei at one point tested this logic. to understand the danger ahead you need the context of what stumbles brought us here now. The start of this week’s equity sell-off came from the Facebook scrutiny – and unlike the 2017 experience – negative news is sticky with the real threat of regulation hanging over the FAANG trade. The FOMC rate hike followed and its cast as a dovish was suspect from the start – leaving more volatility and more dotplot watch
ing as the US central bank sees faster growth, lower unemployment but stable albeit slightly higher inflation. The overshoot forecasts of 2.1% CPI In 2020 don’t help the doves nor the USD. The Trump China $50bn trade tariffs finally were delivered. They were followed by China outlining $3bn in reciprocal tariffs on the US and that sparked a larger rethink of global growth risk leaving FX and bonds vulnerable. Finally, the US NSA head McMaster resigned after yesterday’s close, making way for Bolton – a hardliner – to lead the N.Korea and China discussions into May summits. This casts greater doubt on talks and any hopes for easy deal making. Today the EU leaders meet with Brexit on their minds and Draghi in their ears as he talks up the economy (despite the slowing PMI flash reports). The JPY as the risk-off barometer breaking 105 opens 101.50 and 104 as the next focus and suggests the S&P500 and other global indices fall further.