There’s a big disconnect for traders. Everyone keeps telling Bloomberg's Richard Breslow that there's so much uncertainty out there that it's too dangerous to trade. They also assume every time we get yet another flailing gyration in a given day’s price action that someone knows something — and it’s big.
The truth is, no one knows anything at the moment. There are enormous uncertainties on every continent and where the ball stops bouncing is anybody’s guess. And your guess is as good as the next guy’s.
The irony is, while we have been ascribing tremendous insight as the cause of every random walk, there has been the simultaneous dismissal of those who might actually have an idea. Or affect outcomes. It’s a characteristic of our times to more heavily discount what experts are saying, but you can take it too far.
The weird and unintuitive truth is since the beginning of this year the deafening roar of investors’ fear of being wrong has drowned out the fact that nothing is going on. Everyone is psyching themselves out instead of trading.
And it’s a shame because given the enormity of the potential news-set down the road, this might be one of those times where it’s easier to trade the rumor rather than the fact. Especially because so many of those hypothetical facts could be digital events.
Oh my God, oh my God, the pound is collapsing. No, no, it’s having its best day in years. As London staggers in this morning, GBP/USD is about 25 pips from its year-to-date average price. Which we might have seen in today’s trading if the range wasn’t so small.
Trump trades have collapsed? Not yet. The 10-year U.S. Treasury yield is set to debut in Europe today a mere two basis points from its YTD average.
The S&P 500, Euro Stoxx 50 and Topix indices are all within touching distance of their average price. And on and on. Big daily volatility, signifying nothing used to be trading desks’ bread-and-butter.
Janet Yellen hedged herself pretty well yesterday. Bullish on the economy, unwilling to commit to anything. Yesterday’s ECB meeting saw Draghi say as little as possible. Why? Because they are uncertain. Start using this to your advantage.
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