- Equities have modest upside absent significant progress in Washington or a strong reporting period which starts in earnest with the banks late next week.
Week in Review:
What makes a super hero? Invincibility? Super-human strength? Resilience – the ability to shake off adversity? All of the above! Superheroes are magnetic, drawing in the masses, exuding a confidence that others glom onto, comforted by a sense that ultimately all will be okay, even, if at a particular point, it seems that the chips are stacked against a positive outcome. I'm not talking about complacency; nope, that would evidence a lack of any concern at any time; that would be boring.
Does any of that sound familiar? Of course it does – all of it. I'm not channeling Superman or even the more believable Stallone, circa Rocky I. I'm talking equities and treasuries. A hawkish Fed? No match for the markets. D.C. gridlock, both interparty and intraparty? Swatted away like a NY Times reporter at a presidential press conference. Healthcare reform? Tax reform delayed longer than a reservation at The Polo Bar? Russian scandal? A floundering administration? Air strikes in Syria? Come on, be serious; the markets are impervious to the collection of such trivial matters, most of which, standing alone, would have felled a lesser foe. Stocks hold on to full valuations and bonds rally. It really is incredible when you think about it, and we all have. But we hang on for the ride, cognizant, perhaps even concerned, about that kryptonite event, but while the ride has had some mild bumps we all remain invested, sanguine in the belief that our capital is safe and sound.
Clearly, the one notable non-believer is Mario Draghi, he of the ECB, steadfast in his belief that the EU economy is not strong enough to exit QE. This is actually positive for the markets, although not for the banks. Free money to invest in an improving economy – what could be better? Maybe when the French elections are over he will get on board.