Market When Closed - Wednesday 12 March
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Step By Step
by Alex King, CEO, Cestrian Capital Research, Inc
In the human world, the important thing today was the CPI print, which came in a little light. That’s the first piece of news supportive of equities for some weeks. You can see other potential upside catalysts waiting in the wings. Some kind of respite in the Russian invasion of Ukraine which markets consider bullish (reality doesn’t matter for our purposes - we are talking about securities markets here where imagined reality is all that matters). More signal and less noise in the tariff policy. A bullish reaction to PPI.
As I mentioned in this note yesterday, global liquidity flows are beginning to look supportive of risk assets too. And like it, love it or don’t care, tax cuts in the US are a kind of liquidity injection for rich people - ie. risk-asset-owning-people. Tax cuts remain high on the Administration’s agenda. Here’s the signal just now.
If you remove less money from the private sector by way of taxes, the private sector has more money to put to work in securities. Again you can argue about the real-economy impact of this and you can believe it to be a good or a bad thing. Doesn’t matter. Our job here is - number go up? Or number go down.
Let’s check in on risk assets after the CPI print. Markets have had a full trading day to digest the number, so any stop-hunting shenanigans are largely washed out now.
Before I go - in machine world, nothing is known about invasions, tariffs, taxes, inflation, or anything else that isn’t a pure number. Which is why machines can be so useful in managing money - particularly in times when the wetware’s emotions are running high.
Read this if you missed it:
Alex King
Short- And Medium-Term Market Analysis
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US 10-Year Yield
Re-testing last week’s highs.
Equity Volatility
I wouldn’t call that a vol crush yet, but it’s certainly supportive of a further bull move in equities.
Disclosure: No position in volatility-linked securities.