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The Weekly Track swooning

- The Weekly Track – Swooning? by Bob Savage
http://track.com/articles/the-weekly-track-swooning/

Summer is in full swing. Markets, like baseball, sometimes miss the ball. The reversal of mood last Friday hangs over global risk taking next week. Some see this as a healthy correction and steadfastly plan to buy-the-dip. Others see the sharp 4% drop in US tech shares as a warning shot for more trouble. The extended gains with no 5% correction in the broader S&P500 make many nervous. The calls for a June Swoon, like that of a baseball team ready to lose games, rests on rates, politics and the narrowing spread between confidence and the real economy. The markets have been blissfully ignoring negative outcomes and last week brought even more from the UK hung parliament to the ongoing Senate investigation into Russia’s meddling in the US election, to the isolation of Qatar by the US and the GCC. The economic surprises particularly in the US remain soft and the bounce back in growth while on target isn’t sufficient to make up for robust expectations.

Many see the world of risk as ready for a correction but volatility and other safe-haven indicators flash green not yellow – witness the 10-year US bond yields holding over the 200-day moving average. Witness the reversal of gold from new yearly highs at $1296. How markets trade seem to be the central driver – momentum in the short term – dominates the daily write-ups and explanations for how bad geopolitical stories continue to be ignored. The Friday swoon – with its sharp buying into the close – maybe just the foreshadowing of a longer summer play for equities and risk in general.