MARKETPLACE VEHICLES: GOING MOBILE © Leo Haviland, December 13, 2017

The Cars ask in their song “Drive”:
“Who’s gonna tell you when it’s too late
Who’s gonna tell you things aren’t so great”?



To the majority of Wall Street marketplace observers, price fluctuations for at least the past few months in many key benchmarks such as the United States government 10 year note, the broad real US trade-weighted dollar, and the S+P 500 generally have seemed relatively peaceful. Many players are rather complacent. However, history reveals that the relative lack of dramatic movement (“volatility”) according to such perspectives of course does preclude greater and ongoing violent future swings. Though the outward landscape of the given financial realm may seem calm, powerful intertwined and shifting forces may lurk beneath, perhaps eventually and possibly suddenly causing substantial tremors in one or more economic (and political) domains.

Confidence yardsticks for US consumers and small businesses are high. American unemployment has slipped substantially in recent years. Yet the fierce political conflicts around the globe between assorted camps, including various right and left wing populist crews and diverse establishment (elite) groups, hint at and probably reflect strong, entangled, and contending variables in economic spheres. The long-running accommodative monetary schemes by the key global central banks such as the Federal Reserve Board, European Central Bank, Bank of England, and Bank of Japan reflect not only their devotion to their interpretation of their beloved legislative mandates. Sustained marketplace manipulation programs such as yield repression and money printing (quantitative easing) also aim at sparking and sustaining economic outcomes favorable to (or at least protective of) the economic and political interests of “the establishment”. Central banks do not want the establishment’s boat to get rocked too much or capsize!

In America and many other regions around the world, sharp cultural divisions involve more than just economic (or “class”) quarrels and concerns regarding financial opportunities and mobility. Partisan feuds involve politics, whether Democrats versus Republicans, liberal versus conservative, the quality of the current Presidential leadership, and so on. Yet fervent debates and frequent anger on Main Street regarding issues relating to race/ethnicity, sex/gender, age, religion, geography, the environment, and so on probably reflect economic (political) splits and consequently hint at the potential for marketplaces to become inflamed.


In any case, the US Treasury 10 year note and the broad real trade-weighted dollar (“TWD”) are two important marketplace vehicles currently near critical levels. The key US 10 government note height is around 2.65 percent, that in the TWD around 96.2 to 96.6. A sustained rise in the UST above that level or a decisive TWD breakdown under 96.0 (and especially if both events occurred) might reflect and probably would increase price volatility in those fields. Such significant moves in rates and the dollar probably also would spark a substantial reversal of the current bull trend in the S+P 500 (and related advanced and emerging marketplace stock arenas). Commodities “in general” in this scenario likely would decline as well.

The enthusiastic “buy the dips” chorus for US equities likely will not remain forever fashionable or successful. What happens if the American Congress does not enact tax “reform” in the near future? Suppose observers focus more closely on the long run US federal budget deficit and debt issues (and debt problems in China, Japan, and elsewhere)? What if US corporate earnings do not sustain notable growth? Will such events (or a US dollar decline; or higher interest rates or central bank threats of these; or some other phenomenon such as trade wars, the North Korea nuclear issue, or further petroleum price rallies) help to stop the train of the glorious long bull market trend for the S+P 500?


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Marketplace Vehicles- Going Mobile (12-13-17)
Charts- Trade-Weighted US Dollar and UST 10 Year Note (for essay Marketplace Vehicles- Going Mobile, 12-13-17)