Stocks are bouncing off 10 YR yields falling, after safe haven inflows. HFTs bidding a little too hard as a precursor that risk has been priced in. It hasn't. Oil is still trading above $69 and below $97, average price at $85. MArkets are on hope that the bond market will be supported in another full blown crisis. Problem: we do not have deflation.
Markets are showing confusion as volatility increases, seen via the VIX (separate pane) and the 10 YR yield collapsing (orange line), as investors' seek safe havens. This in turn has made the S&P 500 jump (bar chart) on human programmed AI (sarc) High Frequency Trading programs to buy stocks, in a rash manner, as the 10 YR yield drops. The above chart 1 shows this completely.
Underpricing the severity of the Middle Eastern crisis, which might indeed be that big conflict after years of heightened tensions between Iran and Israel/U.S., shows the overconfidence of the market in its assumption that any crisis can be overcome with fevered speculation. America's economy is no way in good shape. Memories of 2020 when the COVID death toll rallied in tandem with the stock market, has everything to do with trillions of $ to backstop the bond market. Which, as we know now, lead to inflation. And it is still with us, that being inflation. Debt binging does not solve imbedded inflation.
Chart 2, shows West Texas Intermediate crude price after the pandemic, has been trading between 69 and 97 since the Russian invasion of Ukraine in early 2022. With and average price of 85. A sticky oil price leads to sticky inflation.
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