Besides form the obvious question of what the actual hell happened to sterling overnight, there are so many other questions marks participants will be asking themselves. Has the pound now bottomed out, what exactly was the overnight “low,” what will the Bank of England do now?
The Federal Reserve and Bank of Japan's actions last week have given a second wind to an alternative investment strategy that relies on cheap money and low market volatility to produce outsized returns. Risk parity trades, which involve borrowing to take long positions in both stocks and bonds, have been favored by some big hedge funds and other institutional investors starved for yield by eight years of record low global interest rates.
Financial markets may experience extreme levels of volatility in the coming weeks as the catalytic combination of sporadic oil prices, ongoing Brexit anxieties and anticipation ahead of the U.S. presidential election leave investors on edge.
The jobs report came in with a good headline number at 255,000. Wall Street went ballistic and even noticed a twinge of euphoria Friday morning. Hold the phone, I’m concerned it isn’t what it seems. You’ve seen me flat out say from time to time I think some fundamental number is a complete fabrication. I think this number is on the level. But I also think they got there by the most creative levels of accounting gimmickry.
Another week, another terror attack. After rising on Thursday, the VIX dropped back again on Friday. Last week I told you the market behaves like a little kid who won’t take all of the news to heart until it becomes personal. The key point here is for everyone to realize what eventually happens when society comes under attack--the stock market comes unglued. Want more proof? Let’s go back 100 years.