Note Précis September 12,2018: Foggy Clarity- As this market cycle has lengthened and as in many prior ones, foggy clarity protestations appear such as suggesting near term corrections could occur but also about being bullish for the long term. They arguably appear as throwaway. Afterall, few would be in an endeavor which they felt was doomed to failure. Some U.S. diplomatic discourses have been attributed as being from Foggy Bottom, originally for reasons of location and now for reasons of clarity or lack thereof about worldwide diplomatic commentary. Diplomacy and markets are not often discussed in one breath but obfuscation can often underscore complacency. It should be of more than passing investor interest. Politics, trade wars, massive war games and actual conflict like in the LeVant indicate a political economy environment not seen for decades.
Misjudgment in political matters or for that matter over trade has often presage heavy costs. Remembrances of 9/11 almost two decades ago and credit crisis a decade ago give pause this week In the markets, excess valuation or assumptions about unchanged ample liquidity thereof have often led to the broadening of sharp volatility and bear markets. In market systems, pretending their non-existence is suboptimal as purging excess serves to readjust expectations. Time and again in managed systems of any hue, ignoring readjustment needs has left them wallowing in inefficiency. Currently, there been lack of clarity on the final achievable objectives of the U.S administration in its political and trade policy interactions. The rise in rightwing populism in Europe may have crested but not peaked. Meanwhile amid prolonged skewed distribution of benefits, there appears again a rise in leftwing populism such in Latin America. We see aspects like political economy tensions not easily modelled but with relevance in markets appearing complacent but which are likely to violently adjust risk premiums.
Markets have seen a bruising in the erstwhile momentum favorites such as equity and fixed income emerging markets as well as in social media and concept manufacture equities. The same can be seen in the bifurcation in Financial Services. So far in 2018 as well, freewheeling Hong Kong markets have been in significant downdraft and have a well-deserved reputations for being especially sensitive to change. Tighter Federal Reserve policy is corroborated by data and its September 12 2018 Beige Book. We see aspects of foggy clarity as being at work in global political and business discourse. We favor quality as well as need for cash reserve accumulation for redeployment later.
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