Market torpor continues...
Just ten days ago a brief post here commented on the "Directionless market..." that we are in an "unusual vacuum", that will eventually lead to a "jolt up, jolt down". In financial markets that once seemed to mark time by nanoseconds we have moved to one that has, for the moment, all the time in the world. Ten days, no change, nothing has really happened apart from a gradual sapping of energy in the equity markets, one that has reduced the VIX, or volatility index, to a healthy level not seen in months but for the wrong reasons.
Investors see no real opportunity. Equities have moved up but there is not a catalyst for the move to continue. Short term safe havens pay nothing, medium term fixed income plays are there but the winning move is over, longer term fixed income looks like a loser's bet. Everyone talks about commodities but in the short term they have been punishing anyone looking for easy money. The hedge fund, private equity, and venture capital worlds are all on hold, not wanting any attention that would attract the Feds and hoping to find discrete opportunities, giving up for the moment on any broad based bets on financial engineering schemes or sector moves.
The summer solstice arrives and may offer a change in the atmospherics of the market's mind. That's the best one can say based on the last two weeks. Yet one could still wonder whether the ravages of the last 20 months, since August of '07, haven't dulled the senses to possibility. There has been a massive amount of stimulus to the U.S. economy. Is it not entirely possible that despite the expected rising unemployment that the stimulus money is just beginning to work its way into the system. Shovel ready projects mean you still need to hire the contractors, employ the people, lease the equipment, buy the concrete, cable, steel grids and bolts, and whatever. Shovel ready is still a few months away. Job security bought with Federal money to local governments is "we'll spend it when we see it" money based on what happened and how terrified everyone was. That's just the U.S.
China, India, and Brazil haven't vanished and appear to have life, ready to slowly step back out again. Little old Peru is cranking, but most of Europe is still cranky. France and Germany could still lead the way out while England, Italy, and Spain deal with devastated property markets. Global credit markets are functioning more smoothly with the most rational spreads since before Lehman, not great but that's a big statement. They are not deep or robust credit markets but the pricing mechanisms are functioning. Equity markets globally are still focusing on short term p/e ratios and not on longer term competitive advantage, not on any real hope for what was once seen as just reasonable growth rates for the many countries with an expanding middle class.
Jolt up, jolt down, maybe, little opportunity near term, lanquid times these. Don't discount the future, or maybe that's the opportunity --- corporate finance 101?
Investors see no real opportunity. Equities have moved up but there is not a catalyst for the move to continue. Short term safe havens pay nothing, medium term fixed income plays are there but the winning move is over, longer term fixed income looks like a loser's bet. Everyone talks about commodities but in the short term they have been punishing anyone looking for easy money. The hedge fund, private equity, and venture capital worlds are all on hold, not wanting any attention that would attract the Feds and hoping to find discrete opportunities, giving up for the moment on any broad based bets on financial engineering schemes or sector moves.
The summer solstice arrives and may offer a change in the atmospherics of the market's mind. That's the best one can say based on the last two weeks. Yet one could still wonder whether the ravages of the last 20 months, since August of '07, haven't dulled the senses to possibility. There has been a massive amount of stimulus to the U.S. economy. Is it not entirely possible that despite the expected rising unemployment that the stimulus money is just beginning to work its way into the system. Shovel ready projects mean you still need to hire the contractors, employ the people, lease the equipment, buy the concrete, cable, steel grids and bolts, and whatever. Shovel ready is still a few months away. Job security bought with Federal money to local governments is "we'll spend it when we see it" money based on what happened and how terrified everyone was. That's just the U.S.
China, India, and Brazil haven't vanished and appear to have life, ready to slowly step back out again. Little old Peru is cranking, but most of Europe is still cranky. France and Germany could still lead the way out while England, Italy, and Spain deal with devastated property markets. Global credit markets are functioning more smoothly with the most rational spreads since before Lehman, not great but that's a big statement. They are not deep or robust credit markets but the pricing mechanisms are functioning. Equity markets globally are still focusing on short term p/e ratios and not on longer term competitive advantage, not on any real hope for what was once seen as just reasonable growth rates for the many countries with an expanding middle class.
Jolt up, jolt down, maybe, little opportunity near term, lanquid times these. Don't discount the future, or maybe that's the opportunity --- corporate finance 101?
posted by John Borden at 8:50 PM
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