Pre-Fed hang-up
Other than some unlikely surprise from the Fed, the market pretty much put the Fed factor aside. We have learned that the borrowing cost remains high despite the aggressive rate cut, so it wouldn’t be a big deal if another 25bps is cut or not. The banks continue to be in need of help, the Fed will for sure provide that by rolling over all the facilities. The Fed has done what need to be done. Any other measure will be slow, indirect and not guaranteed to work desirablely. The market is just hanging up there to wait for this to be finished and move ahead in either direction with any excuse.
Yield curve
As explained above, the drop of yield curve reflects the view of the Fed irrelevance. The Fed is already at its full throttle, even if there are more cuts on the way, the real (lending) power is clearly dry. So the bonds market is focusing more on the risk rather than any future rate changes. BTW, inflation risk is one of the many.
Inflation
I do believe the media and the main street focus will shift again back to inflation. But I don’t think it automatically means negative, well, maybe negative for short term. The anxiety that it creates will probably push up VIX. Before the credit problem becoming a world wide crisis, the U.S. has successfully exported inflation all over the world. It is not much demand driven, but a panic effect.
Oil
A sudden oil jump may not have much long term effect, but for a short term, traders will put their feet on the brake for any further short. This week’s inventory report will be key to the future development.
Carry trade
I don’t think carry trade can come back so quickly, at least not on a large scale. Though I can’t give a convincing argument, other than technical ones, about why the stock market swing up recently, I feel that the unknown reason is behind both the stronger dollar and the rebound of the stocks. After all, both the market and the dollar were short term oversold. Correlation not causality, I say.
Add a couple more lines here. The carry trade I am takling about here is "using Yen to buy US stocks". The main currency carry trade always exists to certain degree.
[ 本帖最后由 jsl 于 2008-4-28 00:04 编辑 ] |