Even Tiger Woods Augusta win could not help the malaise settling over equity markets. The DJIA fell 0.1% to 26,385, the S&P 500 Index was down 0.1% to 2,906. The financial sector led the modest decline as Goldman Sachs and Citigroup presented mixed quarterly results. Even stronger Chinese export data and US regional manufacturing activity provided little excitement. Goldman Sachs reported Q1 EPS of $5.71, above the $4.89 consensus, as revenues declined 13.0% y/y to $8.8 billion, below the projected $8.9 billion. GS stated that it is satisfied with its performance in 1Q, considering the weak trading start to 2019. VIX index moves lower to 12.20 and FX volatility faded further with only fringe EM providing excitement. With news flow limited and volatility, nonexistent USD continues to dominate Euro and CHF as negative yields weigh on directional trades. Chatter about EU elections or EU centric threats (Spanish & elections etc.) is now being faded with markets focused on ECB policy decisions. But this is now the global theme driving asset prices. With the fear of normalization gone (markets are now pricing in rate cuts by the Fed and the ECB), loose monetary policy will prop-up risk-taking. Traders should avoid cyclical repricing due to short-term headlines and focus on structural central bank actions. Case in point 1Q PBoC monetary policy meeting less dovish press statement. Given this thinking, we would reload on risk on pullbacks.
By Peter Rosenstreich