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What a week that was eh Dan? I complained at the end of last...

  1. 3,305 Posts.
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    What a week that was eh Dan? I complained at the end of last week what a bumpy ride it was, but to the week that followed was not more settled. So again we have to sit around reading tea leaves, throwing bones, or whatever form of divination you prefer and try and figure out exactly what all of this means.

    So my first thoughts were along the lines of "is that it?", and I'm finding myself on the fence a bit as to how October and the run into the end of the year plays out on the back of this. The "mini-deal" seems both exactly what the markets needed to return some stability, but also something that may throw a bit of a spanner in the works in the short term as well as some more volatility, as we keep our ears to the ground for any actual details over how much of a deal it is. Or if it's as some more cynical leaning types suggest which is something closer to smoke and mirrors than something of substance. Either way, we saw last week just how quickly markets can shift on trade war headlines whether they end up being accurate or not (yeah I'm looking at you SCMP). The markets are pretty desperate to see this trade war saga conclude, but we've been through this so many times before that there will be many eyes casting the most cynical of eyes over the deal, and I reckon they will find little to convince them that this time is sufficiently different to change stance.

    It has also dampened expectations a little over what was looking a pretty certain 25 basis points rate cut at the end of October, and shifted the Fed futures effectively from a 4/5 probability to 4/6 (from 80% to 67%) for October. A cut does still looks very likely, though I'd not write off the chance that the Fed holds for October.

    https://hotcopper.com.au/data/attachments/1768/1768892-9b7bfb8e21f905e13ada41ca685223bb.jpg
    (via CME)


    When listening to some analysts on late Friday, a few were more than suggesting this could be a case of sell the news. If you had the proverbial bull on one shoulder whispering tales of rate cuts, new all time highs, "midcycle adjustments", and the bear on the other warning you of impending recessions, the many geopolitical issues, and that the two largest economies are seemingly prepared to play chicken with the global economy; I think it's easy to see why traders are struggling to see very far into the future. Is this rally the real deal? It is too soon to say I think, we just don't know enough. That we are short on details inherently makes me cautious, and that the scope of the deal is so limited means people will be looking forward for signs of further progress. But if I were to make a call at gunpoint, this does read like a sell the news moment in the short term to me too.

    And I wonder why I feel 20 years older than I am.... much to ponder as always.

    At least Bathurst was an epic, and it doesn't hurt my mood that a couple of Kiwis were on top. I'll certainly enjoy it while it lasts.

    Hope you all have a great week.

    https://hotcopper.com.au/data/attachments/1768/1768830-158a1fcb089353581ca9a995cd6461d0.jpg
    Last edited by Bugsam: 13/10/19
 
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