{"id":21415,"date":"2016-07-10T18:18:25","date_gmt":"2016-07-10T23:18:25","guid":{"rendered":"http:\/\/olduvai.ca\/?p=21415"},"modified":"2016-07-10T18:18:25","modified_gmt":"2016-07-10T23:18:25","slug":"risk-onrisk-off-what-schizophrenic-markets-are-telling-us","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=21415","title":{"rendered":"Risk On\/Risk Off: What Schizophrenic Markets Are Telling Us"},"content":{"rendered":"

Risk On\/Risk Off: What Schizophrenic Markets Are Telling Us<\/a><\/h3>\n

<\/i>These trends cannot be reversed with yet another rate cut or another “whatever it takes” announcement.<\/i><\/p>\n

In the conventional investment perspective,\u00a0risk-on assets\u00a0(i.e. investments with higher risks and higher potential returns) such as stocks are on a see-saw<\/b>\u00a0with\u00a0risk-off assets\u00a0(investments with lower returns and lower risk, such as Treasury bonds). When risk appetites are high, institutional managers and speculators move money into stocks and high-yield junk bonds, and move money out of safe-haven assets such as gold and U.S. Treasuries.<\/p>\n

But recently, markets are no longer following this convention.<\/b>\u00a0Safe haven assets such as precious metals and Treasuries are soaring at the same time that stock markets bounced strongly off the post-Brexit lows.<\/p>\n

Risk-on assets (stocks) rising at the same time as safe-haven assets is akin to dogs marrying cats and living happily ever after.<\/b><\/p>\n

What the heck is going on?<\/p>\n

Why are markets acting so schizophrenic? What\u2019s changed?<\/b><\/p>\n

Before we cover the dynamics that are in play, let\u2019s review the market gyrations so far in 2016.<\/p>\n

The Market Gyrations Of 2016<\/b><\/p>\n

Risk-off \/ safe havens<\/b><\/p>\n

Gold:\u00a0from $1,060\/oz in January to $1,360\/oz (as of July 5)
\nSilver:\u00a0from $13.90\/oz to $20\/oz
\nU.S. dollar:\u00a0from 99 in January to 92 in May to a current level around 96. (The DXY dollar index was 80 in mid-2014 and topped 100 in March 2015.)
\nU.S. 30-year Treasury bond yield:\u00a0from 3.00% in January to 2.14% in early July.
\nTLT (20 year bond ETF):\u00a0from 120 in early January to 142 in early July.<\/p>\n

Risk-on<\/b><\/p>\n

S&P 500:\u00a0from around 2,035 in early January to 1,820 in February, topping 2,100 in April, then a decline below 2,000 in June and back to 2,100 by July 1 – and a new all-time high just today. (SPX was above 2,100 in mid-2015, then it plummeted to 1,825 before bouncing back to 2,100 in late 2015.)
\nJNK (high-yield bond ETF):\u00a0from 36.5 in May 2015 to 32.5 in early January to 30.5 in February to 35.5 on July 1.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

Risk On\/Risk Off: What Schizophrenic Markets Are Telling Us These trends cannot be reversed with yet another rate cut or another “whatever it takes” announcement. In the conventional investment perspective,\u00a0risk-on assets\u00a0(i.e. investments with higher risks and higher potential returns) such as stocks are on a see-saw\u00a0with\u00a0risk-off assets\u00a0(investments with lower returns and lower risk, such as […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[127,431,4924,4259,4258,2443],"class_list":["post-21415","post","type-post","status-publish","format-standard","hentry","category-economics","tag-charles-hugh-smith","tag-interest-rates","tag-oftwominds","tag-risk-off","tag-risk-on","tag-stock-markets"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21415","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21415"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21415\/revisions"}],"predecessor-version":[{"id":21416,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21415\/revisions\/21416"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21415"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21415"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21415"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}