Much was made of Trump trade advisor Peter Navarro's comments on CNBC yesterday - that prompted a 200 point bounce in Dow futures - but most notably there was no follow-through overnight (China stocks, yuan weak) as it appears The White House's "just kidding" kneejerk response to markets is failing having cried 'fire' in the theater one too many times.
"The market is over-reacting," Navarro profferred - which algos instantly took as relief and ignited momentum via USDJPY (all of which was erased overnight)...
But as former fund manager Richard Breslow notes, “You are over overreacting” is about as loaded a phrase as there is out there. And it’s also becoming more trite by the day.
In only very limited circumstances is it altruistically meant to help the recipient. It’s far more likely to mean some version of, “Why are you so angry just because I messed up?” Usually with the implied, but unspoken, word “again.”
It’s the ultimate passive-aggressive non-apology. Thus spake Peter Navarro.
Time and time again, we are treated to headlines that read, markets bounced after so and so chastised traders for listening to what they said. We are supposed to know which audience the comments were meant for. That’s well and truly taking targeted advertising to the next level. And it isn’t higher.
Find very little solace when a down day for the S&P 500 elicits these immortal words perfectly on cue. The constant need for do-overs doesn’t inspire confidence. It merely defines the latest iteration of what has become the official reaction function.
Who needs a central bank put when all it takes is a few choice words to get the algorithms chasing their tails?
But the rest of the world isn’t lines of code, and words do have consequences. Playing the junkyard dog gets old for everyone involved. And, as we’ve seen, it’s becoming recognized as simultaneously less convincing and more dangerous. Being understood to not being able to say what you mean isn’t a prescription for progress. On anything. And it’s the opposite of realpolitik. Zealotry has its place, but acting like Sicarii is something to be done only with very careful consideration and under the greatest of provocation. Do invading BMWs pose an adequate threat?
And now, as a segue only possible in a trading note, what levels to watch in this young but already messy week?
The S&P 500 is fairly straightforward with 2700 being a nearby and obvious level of support everyone will be keeping an eye on. For a close touch 2720 is a reasonable pivot for the day with good old 2750 looming large above.
Treasury yields are worrisome. They should be higher, but they’re not. I’d much rather get involved if the 10-year could manage to get back above 2.92% than here. Not a big ask. The alternative is yields I have a hard time fathoming. Sovereign yields, including bunds and BTPs often have a hard time masking reality.
As for the dollar, it’s deeply conflicted. Many easy levels to cite, so as a punt to the bigger picture, the June 14 range for the dollar index will trap it until it breaks one way or the other.
I was thinking about throwing in the exhortation that it is better to speak softly and carry a big stick. But under the circumstances, if I were giving government spokesmen some advice, I’d tell them to reconsider what columnist Mary McGrory meant when she wrote, “Since Harry Truman left town almost nobody has spoken his mind. Mr. Truman took the tradition of plain speaking back to Missouri with him”