I recently said that markets were cruising for a bruising. For now, they’re just cruising, mirroring the path set by Corporal Ferro as she guides her drop ship to a perfect landing on LV-426 in James Cameron’s Aliens.
There is still little stopping risk assets, short vol is paying steady premiums for those picking up dimes in front of the proverbial steamroller, and risk-free instruments still offer 4-to-5% for anyone who feels like temporarily getting off the train. In other words, it’s very pleasant indeed for investors. From the perspective of the macro data, that’s easy to explain. Markets are still being fed information that the (global) economy is doing ok, inflation is falling and while interest rates are set to stay high, they’re also about to come down, by 50-to-100bp. Does this story still check out? Just about.
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