E Markets: Ides

Stuck with Friday, between Pi day and St. Partick’s with many warning to beware because of the witching expiries and the sharp turns in positions that followed them in September and December for risk. Markets are fickle and superstitious. Why the fears of delays yesterday and none today for US/China trade talk or Brexit? Why the insanity of the New Zealand atrocity today? Hate goes a long way. Why does Modern Monetary Theory (MMT) seem so extreme to BOJ Kuroda after 20 years of its in Japan? MMT is worth highlighting as a rising theme for Western democracies after 10-years of QE and ZIRP or NIRP has lifted assets but not voters. The risk-on today seems less about politics and more about the techinical engineering of central bankers to keep finance stable. The long-tail risk of which is MMT. The experiments of "normalization", as opposed to the fears of a liquidity trap, are on play in 2019. This started with the ECB and continues with the BOJ today. There is some sense that monetary policy is great for braking a too-hot economic world but not so good at accelerating it, which requires fiscal stimulus. Hence the MMT discussions. Markets are waiting still for some volatility as the excitement around Brexit and China has been muddled at best because everyone knows its not over and that the delays can become permanent. Being in the middle as in the ides isn't safe, watch your back. This is the same for those that want to believe in long-term value plays. The EUR is probably fair value at 1.25 but the chart is telling us 1.08. 

Question for the Day: Why is oil higher if markets are fearing lower global growth? Oil prices along with a number of other markets are used to measure global demand. The anomaly of the last week and a bit of this one is in the rising prices versus the growing fears of a global slowdown. The BOJ/ECB shifting outlooks highlight this point. The oil market is digesting 3 key drivers - the OPEC plan, the Venezuela crisis and the US sanctions on Venezuela and Iran. The price action in oil reflect these stories more than the overall supply/demand dynamic. This means that the signals of higher oil have less correlation to growth hopes than usual, and indirectly help emerging markets less than normal. 

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