US GDP came out yesterday at 3.5% for the third quarter and investors ran to find risky assets. The last two weeks before GDP saw negative stock markets and tepid economic news. Risk-off was the trade. There is no clear intermediate-term view for the markets. I say intermediate because there is the general belief that for the longer-term equities should move higher in a recovery, bonds should fall, and the dollar should be in a downtrend as long as the Fed QE-type program is in place. Investors are looking for a confirmation in a news immediacy that they should invest. If they do not have the right conditions, then we move immediately back to safety.
This switching behavior has been the market characterization for the last nine months. We have an underlying trend which is stock up, commodities generally up, bonds flat, and dollar down. But don't get too comfortable with this environment because there will be short-term reversals which clear out some of the opportunistic traders and provide continued risk. We are seeing this risk come back in the form of higher volatility.
This is the environment we are living in and there seems like there is little that has changed this behavior.
This switching behavior has been the market characterization for the last nine months. We have an underlying trend which is stock up, commodities generally up, bonds flat, and dollar down. But don't get too comfortable with this environment because there will be short-term reversals which clear out some of the opportunistic traders and provide continued risk. We are seeing this risk come back in the form of higher volatility.
This is the environment we are living in and there seems like there is little that has changed this behavior.
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