Asia Market: Let The Good Times Roll


Sometimes you have to throw conventional wisdom out the door and just let the good times roll.

The about-face drifts lower in US rates after the booming ISM and payrolls is not merely a function to a substantial short positioning feeling of gradually being squeezed, although it’s a significant factor. Make no mistake, this is a global equity market that’s turning exceptionally comfortable with growth driving up yields, supported by a Fed which is in absolutely no hurry to tap the brakes.


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The question is: does it get better than this, or are we nearing peak optimism? Or, with US stocks remaining in "kid in a candy store” mode, are we gliding on a sugar rush tailwind from a once in a generation type stimulus effect.

The inability for yields to move higher is a clear signal of extended positioning, but the "drift" should not be mistaken to indicate that the global recovery narrative has come to an end.

The distribution of vaccines in China and Europe is improving quickly where the catalyst runway is lengthy. Many adults have recently become eligible in the US, which means they will achieve maximum efficacy in May after two doses.

Therefore, the market may be willing to wait for at least a couple of months to see how population inoculation passes through into economic activity before retesting the FOMC resolve. Any delay in the taper or a pushback in the FOMC rate hike cycle could be viewed as an opportunity to add risk. 

I'm not sure the street is overly surprised by the level; however, both the velocity and timing may be flabbergasting to most.

In what’s typically a low risking period ahead of earnings, the pace and absolute levels of the move have likely forced active managers into the game who were relatively quiet in March ahead of quarter-end (this is according to several Prime Brokers I'm well connected too). Sometimes the fear of missing the boat becomes too overwhelming and all of a sudden the chase is on.

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Disclaimer: The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; ...

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