A Unified Explanation Of All The Crazy Movements In Global Markets Right Now

thenews 2013.05.30 14:51

I have given a friend a task lately to come up with a consistent theory explaining recent moves in markets. I said it could be a conspiracy theory, a preposterous theory or any-other-theory as long as it provides a consistent explanation of recent moves. His reply was “people are selling what they were very long of” but then he reflected and said that it wouldn’t be consistent with the equity rally.

While I do not aspire to give you a comprehensive explanation, I think I have one that at least I feel comfortable with. But let’s start with a snapshot of what’s going on:

USTs are selling off.
Inflation keeps surprising to the downside.
USD is not really rallying (except against the yen).
US equities are generally supported.
Credit is wider but not spectacularly so.
Implied vols are creeping higher.
EM bonds are under tremendous pressure and currencies are weakening.
Commodities had come off but have sort-of stabilised lately.