Market update: Small bounce on Friday after the bloody week, Trump now more popular than Obama

12 Feb

by Mihály Tatár

 

Good Morning!

 

  • What a week! While I was struggling with the flu, the almost-unexpected market correction (Market update turned bearish on the 4th of January) accelerated and the violent moves freaked out investors and the financial media. Stocks dropped the most (SPX +1.49% on Friday, -8% for February, DAX -1.25% and -9% for February, Shanghai +1.20% and -8% for February, with the best stocks performing the worst, Exxon -13%, Amazon -7%, Caterpillar -10%), followed by bonds (US 10Y 2.88%, German 10Y 0.80%, with the 3M Libor at 1.80%), and commodities (WTI 59.80 and Brent 69 USD from 66 and 71 USD respectively, Copper -5%). It’s worth mentioning that the media commentators are conditioned by the 2008 Financial Crisis –  for example, any move lower has to have sinister reasons, like derivative VIX products blowing up – and use the 2008  vocabulary too easily (’global market collapse’ is not the word I would use, for example, – what kind of market collapse starts with the Forint slowly weakening to 312 against the Euro and when it takes the EURUSD one week to trade down from 1.25 to 1.23?).  That said, the one-way stock and risk trading we have seen since 2009 is over, and the market has to discover the non-monetary eased, valid prices – that is why the most overvalued stocks dropped the most. (Personally I suspect that one positive news, the US infrastructure spending package, is not appreciated yet, and this year can see brutal zig-zag movements. Hedge fund gurus who predict a ’global meltdown in the scale of 2008’ are just talking their books again. )

 

  • Russia urged all sides to show restraint after the Israeli-Syrian-Iranian air war intensified on the weekend, with Israel angrily striking 12 sites over Syria. Several geopolitical strategists note that the shooting down of the Israeli F-16  by a Russian anti-air battery is a dangerous omen for the Israeli military: It’s not just their first combat loss since the 1983 Lebanon war, but the first time since decades that the Israeli air force can not operate with impunity over any airspace. Given the advances in anti-air missile and laser technology, countries which rely to heavily on air superiority will probably get into trouble going forward. In the meantime, the Turkish military operation against the Kurds ran into problems: As soon Turkish troops reached the mountains where Russia did not allow for Turkish air raids, the attack bogged down and several dozen  Turkish soldiers lost their lives fighting the terrain-smart Kurdish fighers.

 

  • Somehow selectively reported by the mainstream media, the latest Rassmussen poll showed President Trump’s approval rating bouncing up to 48%. (To put this into perspective, President Obama was at 44% at the same time of his presidency in 2010. It seems that the tax cuts were not bad for his popularity, after all.) You know that the US Left is frustrated when the Washington Post laments that ’Whites may remain a majority in the US even until 2044’, and calls for the Democratic party to somehow finally get rid of marxist Bernie Sanders.

 

Have a nice week,

Mihály

 

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