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The Weekly Track flat

- The Weekly Track – Flat by Bob Savage
http://trackresearch.com/articles/the-weekly-track-flat/

There is a dynamic tension between those that want freedom and those that want facts. The fact that there is a flat earth society and that it dares to counter scientific theories is evidence of such free-thinking but its also lays the seed for fake news and a world where people believe what they want, when they want. We all can live in a bubble of our own information apart from the “real” world. All of which drives, with growing financial inequality, populist leaders to the forefront of politics. If we learned one thing this week its that markets want democracy over the hierarchical powers of Europe. The larger battle is that of a central European Union and currency against the interests of its nations. Many see the last week as a beginning of political calm, others see longer term destruction. The Italian rise and fall of yields last week links back to the push-back from the EU biased Italian President against an anti-EU candidate for Finance Minister from an awkward
populist coalition. The chaos and noise was notable and the force that helped build back a new League/5-Star Movement government. The new coalition plans to increase welfare spending that may breach European Union spending rules, while it also calls for tough anti-immigration measures that could lead to further clashes, however most see a less Eurosceptic, more technocratic approach from Rome. The net result for May and the last week was one of divergence where the world appeared to be a zero-sum game. The USD is flat, global shares flat, bond yields flat. One up, one down. May was flat, like the world’s growth and confidence. The issues for the markets is whether this calm holds through the summer with the US FOMC expected to hike rates further in June, the ECB likely to taper their QE and the BOJ cutting back on its bond buying to push up 10Y yields. The rate push seems at odds with the sluggish global growth performance in 2Q except for the US – and that makes th
e US trade policy that much more difficult for the world to understand and counter. Hopes remain that US/China and rest of world talks lead to a better outcome than a global trade war. For June, the dividing line between flat and somewhere drives on growth with policy the noisemaker.