Either because of, in spite of, or oblivious to a concerted effort by China to cheapen its lately-strengthening currency (one could make attendant bull or bear cases for the rest of Asia) Asian equities mostly rallied overnight, with 12 of the 16 markets we track closing in the green. Brexit talks this week are all the talk in Europe, and the action in equities and currencies (despite the warning cries) says the UK won't be busting out without a trade deal (the overwhelming political risk makes that my base case as well); all but 4 of the bourses we follow are trading higher so far this morning. U.S.'s major averages, expecting more stimulus (it'll come, whether it's pre or post election), anticipating special stuff out of Apple's big day tomorrow, and betting that positives will emerge from bank earnings results this week are nicely higher as I type: Dow up 269 points (0.94%), S&P 500 up 1.44%, Nasdaq up 2.13%, Russell 2000 up 0.51%.
Interestingly, the VIX (SP500 implied volatility) tells a somewhat different story about the state of market affairs this morning, up 0.80% (negatively correlates to stocks roughly 75% of the time), although VXN (Nasdaq vol) is signaling all's well, -1.26%. Note, both of these volatility measures sit at levels that denote significant equity market risk.
Commodities certainly aren't reflecting a world of high demand this morning: Oil futures down -3.20%, gold's down -0.33%, silver's down -0.45%, copper futures are down -0.51% and the ag complex is down -0.74% to start the day.
The bond market's closed for Columbus Day, but futures are trading; 10-yr treasury's down a bit (yield up). The dollar's flat, -0.01%.
Our 23% allocation to commodities is effectively muting the morning's move in our core portfolio; up 0.35% as I type. Tech, consumer staples, emerging market equities, healthcare and banks lead the way, while ag commodities, silver, gold and energy stocks drag.
As we've acknowledged herein ad nauseam over the years, much in this world indeed changes as generations come and go, yet history typically, nevertheless, rhymes, while human nature absolutely repeats:
"The early stock markets were moved by hopes and fears as much as their later counterparts. These emotions are unleashed during moments of speculative euphoria. They follow the path of least resistance, moulding each mania, regardless of its historical context, into a common form. This explains why all great speculative events seem to repeat themselves and why the experience of the 1690s seems so familiar."
-- Edward Chancellor
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