Markets

The short vol trade may now be over. Bond yields will again reach levels that causes angst for equity markets. And equities will tumble. Rinse and repeat.

Yesterday’s market meltdown - and today's reaction - reduces the risk that the Fed will over-tighten, taking froth out of an over-extended market.

Everyone is bond bearish these days. Alan Greenspan is because he expects inflation. But this will mean tightening that risks derailing the US economy in 2019 and beyond.

The position I have stressed is one that is counter to the bond bear market narrative. But, that is longer-term. Shorter-term dynamics are bond bearish.

Jeremy Grantham discussed his recent US market commentary with Consuelo Mack. The essence of Grantham’s comments were bearish for the US, suggesting investors could expect only a couple of percent real return over the next couple of decades…

"Basically, with the Fed and the other central banks flooding the world with money, a rising tide lifts all boats." So it's the tightening we have to fear.

What will stop the dollar's sell-off is not officials.  It is not the likelihood of a Fed hike.  Rather the market will exhaust itself. 

Bridgewater Associates' Ray Dalio warned that a rise in bond yields could lead to the biggest crisis in fixed income markets in almost 40 years.

Probably not. As Mnuchin and President Trump have done before, a distinction was drawn between short- and longer-term perspectives.

Big name tech companies are burning through billions of dollars as they try to scale. The promise is that they will one day look like Amazon, dominating markets and sporting massive levels of cash flow to reinvest.