With US equity futures down hard in the pre-open...
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VIX has spiked above 19 for the first time since the election in Nov 2016...
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Following a Hindenburg Omen signal late last week.
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As Bloomberg reports, accounts of how concerned investors should be running the gamut, from confidence traders will rush in and buy the dip, to warnings this time is different -- that selloffs that begin in the bond market have a habit of snowballing.
“It is now signaling, potentially, the end of this eight-year bull rally,” said Rich Weiss, chief investment officer and senior portfolio manager of multi-asset strategies at American Century Investments. The firm manages $179 billion. “The Fed is going to have to move the interest rates, the bond market is recognizing that this incremental economic growth will spur on inflation from various sources.”
Of all the threats, surging Treasury rates and their implications for inflation are vexing investors the most, with this year’s half-percentage-point climb calling into question a valuation case on equities tied to how much more you get from corporate earnings than in bond interest.
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For last week, anyway, nobody seemed to care about the ostensibly positive signals coming from the bond market, the idea that higher yields bespeak rising demand for money among borrowers.
“It’s kind of a strange time and we seem to be driven by a fear of what everyone wants, and that’s higher rates,” said Joe “JJ” Kinahan, the chief market strategist at TD Ameritrade. “Higher rates confirm a stronger economy, and the market was very afraid of that all week long. And that’s been a big reason for selling.”
Central to the current anxiety is how far stocks have come in so short a time. Last month’s 5.6 percent gain in the S&P 500 was the biggest for any January since 1997 and using the index’s total return it has now risen for 15 straight months.
Technically, sell signals are starting to dominate...
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Friday’s sell-off finally ended a streak of 404 days in which the S&P 500 sailed along without a 3 percent decline from any previous point, a record in data going all the way back to 1928.
And outflows soared from stocks and EM debt (even though last week saw a massive inflow into short vol ETFs - right as VIX spiked).
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