Well, that was essentially how things were playing out until the Bank of Japan threw the world quite the curve ball, one that not a single economist polled saw coming ahead of last night's policy meeting.
You see, Japan's central bank has been adhering to a stated cap on 10-year government bonds (i.e., yield curve control) of 0.25%... Last night's policy meeting yielded a shocking (as it came out of the blue) increase of the cap to 0.50%.
Now, I suspect you're wondering what the big deal is... Well, frankly, in our long-term macro view, it's not huge, but it is something… But for those who are levered against low and stable Japanese interest rates, a historically-week yen -- those who financed their global asset purchases with yen (watch US treasury yields), oh my, it is indeed a big deal!
As I type, the dollar is down a massive (for a currency) 3.5% against the yen (which, on-balance, reflects well in our core portfolio so far this morning) and treasury prices are getting utterly hammered (yields spiking), as the latter go rushing back to the yen -- and, not to mention, as traders rush to game that currency dynamic.
US stocks, on the other hand, have, for the moment, recovered from their overnight decline... Looks like, for the moment, mind you, yesterday's short-term technical signal was maybe legit.
Asian stocks got hammered overnight, with 15 of the 16 markets we track closing lower.
Europe's leaning slightly green this morning, with 10 of the 19 bourses we follow trading up as I type.
US stocks are higher to start the session: Dow 140 points (0.43%), SP500 up 0.40%, SP500 Equal Weight up 0.37%, Nasdaq 100 up 0.34%, Nasdaq Comp up 0.44%, Russell 2000 up 0.87%.
The VIX sits at 21.81, down 2.72%.
Oil futures are up 0.90%, gold's up 1.76%, silver's up 4.57%, copper futures are up 0.75% and the ag complex (DBA) is up 0.92%.
The 10-year treasury is down (yield up) and the dollar is down 0.79%.
Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), 30 -- led by silver, Brazil equities, base metals miners, MP Materials and oil services stocks -- are in the green so far this morning. The losers are being led lower by long-term treasuries, Vietnam equities, emerging market bonds, intermediate-term treasuries and US staples stocks.
Have a great day!