It is very hard to tell what is moving market, but if Fitch changing the outlook from positive to stable on Bulgaria, Czech, Lativa, and Lithuania can push us down 0.5% then if you are long, you need to be putting on some sort of a hedge. I’m not a big fan of puts, and maybe this isn’t the news that caused the market to go down, but if it is, then that is scary.
It is Fitch, not Moody’s or S&P.
It is outlook, not an actual rating.
It was from positive to stable.
It is on countries that are relatively off the radar screen.
Until S&P does something to follow up on its changes last week, you need to be very careful. With moves like this, there is no way that a French and EFSF downgrade is priced in.
The other headline I caught was Merkel and ESM not being increased. Okay, but I didn’t really know it was being increased? That wasn’t in the statement from last week.
Again, maybe we get QE3, maybe we get money from the IMF, but the reality is we are more likely to get Sovereign Debt downgrades, and with how thin this market is, the move could be fast and brutal.