Markets Now Seem Risk On, But Fundamentals Have Not changed

Did you see that market reversal? It looked so bearish, but then there was a complete pattern change. How about that. Once oil stopped its fall, everything went risk on. While I absolutely agree that American innovation is at work every day, I can't agree that the American company is an island unto itself.

The American consumer is proving tepid, except with, of all things, SUV cars. I like any vehicle with a wide foot print and a comparatively low profile. I like this feature for safety reasons. That really limits my options to a couple of companies.

Looking at the chart of the U.S dollar, we can see stability. Take a look:

From oil and the U.S. dollar, compare high risk assets, such as high yielding bonds:



We do have a risk on attitude. My posit is that two causative points exist for a rally in risk on assets. First, and for some reason, a bottom in oil has been thought to be found. Excluding fires and strikes, the fundamentals have not changed in oil. Where gas pricing can be seasonal, the fundamentals also have not changed. Even if SUV sales increased, reality is this idea of "subprime" vehicle loans. Frank reality is, versus the real estate market, those vehicles get repossessed over night and sold the next day. Second is why not buy in a bull market where any news is good news, despite U.S. multiples advancing on stock pricing.

Confusing the issue is the drop in U.S. treasury values. Stated otherwise, the spike in U.S. treasury yields. Look at the 10 year:



Any person with a conscience can see that rise in the 10 year yield, which means a drop in the price of the 10 year U.S. Treasury Bond, is a whole bunch really fast, despite trends and changes in fundamentals.

The guard to put up now is despite no real change in economic fundamentals over the last month, one should become cautious. This looks so much like a strange head fake to be caught on an over-head cross punch, if you've ever boxed. Maybe not. But look at the fundamentals.

Looking at currency markets, we are seeing in equity and debt markets, what I think is a bull's head bounce on risk assets, not a real issue that will deviate from stronger cross market trends. I could certainly be wrong.

Always remember, I offer opinions only, no investment advise. For investment advise, learn from ideas and ask of the person holding your money.