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The Weekly Track the-clash

- The Weekly Track – The Clash by Bob Savage
http://track.com/articles/the-weekly-track-the-clash/

The clash between the markets this week started with those that see a “Sell-in-May-and-go-away” risk rising - with the concerns over Trump and his connection to Russia investigations leading to extended Congressional paralysis and no fiscal action – against the “Buy-every-dip” passive money crowd that see no alternative to risk assets, particularly equities, given the ongoing easy money policy everywhere and the rising probability of an FOMC pause in their hiking back to normal regimen. Throw in the battle between value and the 1Q profit reports along with doubts about US growth into 2H 2017 and the doubts about China debt and growth into the Party Congress and you have the makings of noise, a larger clash of positioning, and another brick on the wall of worry to climb. The last week did change one thing – the level of volatility across many markets shifted from extreme low levels to moderately low levels – but a 1.8% drop in the S&P500 on Wednesday – whil
e being the worst day of 2017 is hardly a bad day in the longer term view of trading markets. This shift up on uncertainty into the next week matters as this is the beginning of the slower summer trading months where news and politics usually take a step back and seasonal patterns from vacation to better weather drive data and thinking. The month of June brings significant policy risks from the French legislative elections along with the UK elections. Throw in the June decisions from the ECB and FOMC and add the US push to investigate Trump Russia connections and you have the makings of a more significant political backdrop for the global economy. Noise levels matter in such an environment and like the UK punk rock band of the 1970s, The Clash, will be about politics and rebellions searching for better alternatives to the present policy courses. This last week wasn’t about the Trump Trade unwinding – this was more about the doubts of a slower US clashing with other nat
ions into the summer. The measure of safe-havens against risky assets will continue to be the key for trading into this next month with Gold and JPY flashing “red” while the S&P500 and the EMBI flash “yellow.”