Cross asset market action increasingly resembles an animal caught in a trap, thrashing about, trying to free itself. A kinder, gentler version would be akin to the child’s game: pin the tail on the donkey, where each child is blindfolded and given chance to try and pin the tail.
Investors, Govt officials, Central Bankers, business people and the ordinary Joe are all trying to pin the tail – ascertain the direction of inflation, the odds of recession, the outlook for earnings, not to mention housing, the labor market and any number of other issues. At least Covid doesn’t feature as it once did.
The outcome of all this thrashing about in the dark is some pretty wild moves ranging from the bond market gyrations with yields spiking and collapsing by 30-50 bps in a week (MOVE index hit highest level in two years last week) or the Commodity markets with huge swings in wheat, fertilizer, copper, iron ore, oil, Nat gas. Equities have actually been the the calm one (VIX under 30 as I write) with many markets up on the week – only the 2nd such advance in the past three months.