Market Found its Mojo

Well I was half right yesterday I guess (or half wrong, if you prefer, but given my oft bearish disposition, I’m going for the optimist’s view on this one). The GDP number came in worse, it was due to a bigger inventory draw down and the market looked through that (Box tick for me). The consumption side was a positive however and that provided a fillip to the market and it certainly got off the fence this time (I lose points on this one). The Fed comments about some signs of recovery certainly helped too and the market feels far surer of things today than it did yesterday.
Usual stuff happened as risk assets rally, bonds sell off. Asia helped too as Japan comes in with a MoM Industrial Production number of 1.6% vs expectations of 0.8% and a previous number of -9.4%. We’re back up at pre crisis levels!!



That’s only the MoM % change however; if we look at the actual index, let’s hold off on the uber- enthusiasm for the time being.

While I’m bearish overall, you can’t ignore the price action of the market and I’ve been pretty happy to advocate standing on the sidelines the last couple of months. This is not uncommon amongst the PMs I speak to, on average I would say they are 50% gross invested. I do think we’ll see a great selling opportunity in equities, I just don’t believe it is yet and as I always find it hard to push a trade I don’t believe in (because if it goes against you, where’s your conviction?), I’m not prepared to jump on board the rally train. As I’ve said before, I just think the market is pricing in too much of a recovery. Ignoring bad news is one thing but rallying 5% off the back of it is another. Just as the market couldn’t bounce to save its life back in Feb., it can't go down at the moment. I think we need to be somewhere in between those two with a more tempered view of the world.