Research Summary
This report discusses the unexpected behavior of global risk markets, particularly after the Lehman anniversary. It highlights the continuous cycle of rate hikes, the correlation between the oil market and other global risk markets, and the potential for higher CPI. The report also touches on the hawkish stance of the ECB and the Bank of England, and Japan’s declaration of victory over deflation. It concludes with an analysis of the S&P Tech index, the Nasdaq VIX, and the Industrials rally.
Key Takeaways
Global Risk Markets and Rate Hikes
- Unexpected Market Behavior: The global risk markets have been behaving unexpectedly, particularly in the context of the tightening cycle and rate hikes.
- False Dawn Rallies: Each rally in the global risk markets has proven to be a false dawn, indicating a lack of stability and certainty in these markets.
- Oil Market Correlation: The oil market has been spiking in correlation with every other global risk market, suggesting a strong interdependence among these markets.
Central Banks’ Hawkish Stance
- ECB and Bank of England: Both the European Central Bank and the Bank of England have adopted a hawkish stance, indicating a potential for tighter monetary policies.
- Japan’s Victory Over Deflation: Japan has declared victory over deflation, despite being on the cusp of a potentially deflationary market event.
- Impending BOJ Decision: The market is awaiting the Bank of Japan’s decision, which could have significant implications for global risk markets.
Market Indices Analysis
- S&P Tech Index: The S&P Tech index has taken out the key support level from August, indicating potential instability in the tech sector.
- Nasdaq VIX: Despite the changes in the S&P Tech index, the Nasdaq VIX still signals market complacency.
- Industrials Rally: The rally in the Industrials sector was a bull trap, suggesting that the apparent positive trend was misleading.
Actionable Insights
- Monitor Global Risk Markets: Given the unexpected behavior of global risk markets, it is crucial to closely monitor these markets for potential opportunities and risks.
- Consider Central Banks’ Policies: The hawkish stance of various central banks could have significant implications for global risk markets. It is important to consider these policies when making investment decisions.
- Analyze Market Indices: The performance of various market indices, such as the S&P Tech index and the Nasdaq VIX, can provide valuable insights into market trends and potential investment opportunities.
