EUR 22.10 For Business Accounts Only

The Weekly Track vacation-planning

- The Weekly Track – Vacation Planning by Bob Savage
http://track.com/articles/the-weekly-track-vacation-planning/

While there were plenty of twists and turns to consider regarding policy and politics last week, few see those mattering much in the next 2 months – declaring it summertime – and arguing its summer vacation rather than a time for anxiety and fear. Whether this proves right rests on the paradigm shift risks about global interest rates. The peak US and EU vacation period is mid-July to US Labor Day – making the next 2 weeks ahead of July 4th central for summer trends. The balancing act of bulls and bears rests on the interpretation of the FOMC action in light of the real economy. The world finds a new driver other than “normalization” as the fear is that any tightening even from extreme accommodation is bad for the economy. The real rate move clashes with the drop in oil prices, the flattening of the yield curve, the narrowing spread of soft to hard economic data. The risk of a larger unwind in confidence post the political reality of the Trump Agenda and Congre
ss as it marches towards summer recess with little to show clashes against the ongoing 2% economy. The bulls hold onto the hope for reform in taxes and regulation, along with the rest of the world’s better recovery, with Europe notable in its political success and with China holding together despite its debt bubble fears. The urge to wait it out rather than sell-and-go is the play. For emerging markets last week – the FOMC hike was an excuse to take some money off the table. For equities, it was more about stock market rotations as the mid-year reweighting and rebalancing into 1H2017 beckons. For bonds, the weight of doubt belongs to the new normal while commodities flash oversupply and reflect the break of demand with low inflation almost everywhere. The battleground is in FX, where there is no vacation – as the USD tries vainly to find a bottom based on interest rate differentials in a world obsessed with equities and geopolitics. For many, the new risk baromet
er this summer is the USD itself – as capital flows want more than a nominal spread pick up to Europe. The USD battles EM and EU growth outlooks, political issues and doubts about future policy volatility eroding its competitiveness but its potential for a bottom with 2Q growth back, US rates holding and consumers still spending – all point to 99.50 breakout risk as well. Vacation plan at your own risk.