The market had a lot to digest this past week and thinner-than-normal mid-summer conditions may have exaggerated the moves...but it still feels like there’s a “sea-change” happening here that may be foreshadowing bigger moves to come.
The mean reversion trade: For the past few weeks I’ve been musing that the “irresistible force” that has moved all markets has been the aggressive repricing of future interest rate expectations since last November.
Three weeks ago (June 21/19) I noted that the increasingly aggressive repricing of future interest rate expectations (soaring bond prices) was the “irresistible force” that had been impacting all markets since late last year.
From the Desk of Drew Zimmerman
It was a week of celebration! Here we celebrated Canada Day, the US celebrated Independence day, but investors had even bigger celebrations as the Nasdaq, S&P and Dow all hit record highs!
June 2019 market performance highlights: Gold up ~$140 (11%) from late May lows, closing higher for 5 consecutive weeks, hitting a 6 year high, WTI up ~$9 (17%) from early June lows, closing higher 11 of the last 12 days, CAD up ~2.5 cents (3.3%) from late May lows, hitting 8 month highs...strongest of the G10 currencies against th
The irresistible force that moved all markets the past couple of months has been the increasingly aggressive repricing of future interest rate expectations.
The US Dollar surged higher this week...after “backing off” the last 3 weeks. All of the major Eurozone currencies plus CAD, AUD and NZD tumbled with AUD and NZD now near multi-year lows. The GBP was especially hard hit as it looks like Boris (hard exit) Johnson will become the new PM.
US interest rates have dropped like a stone since last November...with the rate of decline dramatically accelerating the last 4 weeks.
Stocks, crude and bond yields fell in May...the USD inched higher. The S+P 500 hit a 2 ½ month low this week...down ~7% from All Time Highs reached May 1st...giving back ~1/3rd of the rally from the December lows...but still up ~10% YTD. Bullish sentiment was near 90% (greed) at the May highs and is now ~22% (fear) but we haven’t seen any panic selling this month.