A difficult winter, market euphoria drained over quarter one, based on forward market forecasts of global slowing momentum and some minor geo-political issues. With spring nearly complete and the summer sun already flashing some hope, participants are now once again comfortable with early year positioning. What's in play; anxiety over April data, trade dispute delays and curve structure to year end.
My view is that the market will not allow another significant drawdown without confirmation that growth is actually at risk rather than just changing pace. It appears growth remains intact and central banks continue to implement an orderly normalisation.
The pace of bond market adjustment appears to be more strongly influenced by funds flows and resulting term premiums. Does it make sense for the US curve to flatten? Fiscal expansion and Usd dollar weakening have traditionally been associated with higher term premiums. If inflation expectations rise will the market accept shorter duration rises are sufficient. There is an outlier risk for a substantial long end adjustment. Funding conundrums on issued debt do not solve at higher rates, with concurrent trade disputes we are in dangerous territory.
The question becomes which outlier will become a market focus ? For the next 3 months not much without factual confirmation, land values and wealth creation across the globe have delivered improvements in savings, emerging markets are still on track and a quarter's income is booked. Stay with equities, may sales are unlikely this year, and waiting is unlikely to offer cheaper opportunities.