From Risk Reversal:
Yesterday marked the 105th consecutive trading day without a one percent
drop on a closing basis. Here’s how that ranks among other streaks
(from BoA/ML on Tues, h/t Zerohedge):
As you can see, the current streak is
working its way up the historical list. Just a few more calm days and
the current streak can pass one of 110 in 1995 and one of 112 in 1985 to
become the longest such streak in 50 years!
Obviously, this lack of fear in the market
flies in the face of what’s going on on the ground, with an FOMC and
other central banks about to raise rates and remove accommodation in
their most significant form since the Great Recession. Political
upheaval in Washington, with tons of uncertainty on tax, healthcare,
infrastructure spending, immigration and trade policy. And of course
geopolitical uncertainty overseas as the EU is under threat from Brexit
and upcoming elections in France (they dodged a bullet in the
Netherlands) and then Germany, as well as a US President and his special
advisor that have called into question the need for transatlantic
military alliance NATO.
So how is the market able to to shrug off
all of this and climb a wall of worry? For some, most of the reasons
listed aren’t huge threats. NATO was a cold war era alliance, the EU was
designed to fail eventually, the populist part of the new President’s
campaign was always a con and the policies actually being implemented
are classic market friendly deregulation and tax cuts. No big deal for
markets, no reason to panic. And most importantly, just how scared
should we be that rates are about to rise? And more importantly, how far
will they go?
Here’s an interesting chart from Pimco (h/t ):
...MUCH MORE