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The Weekly Track waste-land

- The Weekly Track – Waste Land by Bob Savage
http://track.com/articles/the-weekly-track-waste-land/

Funny how a poem about the desert of the soul in post-WWI Europe can apply to the ongoing easy money world where risk rises from the ashes of any defeat. Death by water is not dissimilar to death by Quantitative Easing. The irony of a winter blast of snow hitting the US east coast this week wreaking havoc on the work week and political meetings seems fitting for the decisions from the FOMC, BOE, SNB, Norges bank and others – money like water takes many forms some harsher than expected. The ides of March hit back the hopes for an easy Spring for investors – there was no big pull back to buy or break-out to chase. Volatility has died even as event risks rise. The week past brought a hike from the FOMC for the US as expected and a win for the Liberal Rutte Dutch government as the polls predicted. Somehow a tightening of short-term money (with the Fed now targeting 0.75%) led to an easing of financial conditions with the S&P500 rallying along with global equities, the U
SD fell and US bonds rallied – expect the numerous Fed speakers in the week ahead to massage this response to their views. Somehow even as the VVD lost 25% of their seats and the far-right Wilders party PVV came in second out of 6 main parties, the world cast the result as the end of extremist populism – also taken as a sign that the French election risks for a Le Pen victory changed – expect some painful rethinking of how long it will take to get a new coalition government and for the Le Pen/Marchon debates to really matter next week. This is a market prepared for the worst and taking solace in the “normal.” There is, of course, a significant difference between the FOMC raising rates to get back to “normal” level rather than tightening to squash inflation. Similarly, the liquidity provided by QE or negative rates in Europe and Japan, where the BOJ bragged about its successfully yield curve targeting policy, doesn’t seem to lift growth or investment in any
way like a rising tide. This week was also about US President Trump and the Congress as the focus on health care reform before tax reform matters and neither seem as simple as the rhetoric from the 2016 campaign. The need for change seems obvious like the need for Spring, new life and water, but the delivery of such maybe matters even more.