Clears the important double bottom
It's like the whole market had to have a peak into the abyss of another painful coronavirus round to understand that it didn't want to go there.
President Biden has been poking a bit of fun at some Republican mouth-pieces advocating for vaccines this week. That it came after Monday's stock market swoon isn't a coincidence.
Markets aren't about pricing in what they want to happen though, it's more about what will happen. The pandemic could hit hard again and cause some suffering and a drag on growth. I'm worried about emerging markets and the unvaccinated but there's a good case that minor curbs, more vaccination and small adjustments will mean a minimal economic impact. Moreover, it may just mean lower rates for longer and more government spending, which is certainly something the market wants to see.
Cable this month has almost moved tick-for-tick with the risk trade and it's a good illustration of how it unfolded. The drop below the March/April double bottom looked dire but after looking into an abyss that stretched down to 1.31 it decided against it. The latest case numbers have flattened and while hosptializations are rising, they're still 6x lower than at the peak.
I think there's a really simple question and answer to guide the risk and reflation trade overall and it's this. Do vaccines work?
If the answer is yes (and I know it's not entirely black and white), then risk trades like cable ultimately win out.
