Macro Commentary
If the markets were a boat at sea, the passengers may be forgiven for reaching for their Dramamine. The rocking waves of the financial markets have left many people a little woozy this past week. So many uncertainties are cycling through at the same time that global sentiment turned stormy before the tide seemingly turned at the midpoint. Were it not enough to have the “no” vote from Greece last Sunday turn into a Greek proposal that is reported to look much like the rescinded offer on Thursday or the daily intervention announcements in the local Chinese A-market going unheeded until it oddly bounced on Thursday too, we added the fact that a technology glitch can cause trading halts at the venerable New York Stock Exchange for almost the whole day. It is natural for markets that have been oversold in a short-period to get a little bounce, but the magnitude and pace again is worth mentioning. The Shanghai Composite for example hit 10% down for the week only to bounce back to flat by the close of trading Friday. The Bloomberg European 500 fell 4.7% during the week before ending up 1.2%. The US was relatively stable during this period and so had a far more mute down 2% before ending on the positive side. These kinds of gyrations show that confusion still reigns and the market does not quite know what to make of it. Traders are still greedy and does not want to miss the bounce, but that also means that sentiment has not fully capitulated. At this point, we are in a “show me” state. Show me that we do not have contagion in our midst and show me that earnings will justify the valuation. A little less uncertainty may put the wind back in our sails.