Afternoon T Got me thinking about the British

Posted by on May 7, 2012 in Uncategorized | No Comments


What will London do? That is one of the big questions going around. London was closed today, so in spite of Europe being open, the biggest financial centre was closed. How will it affect markets tomorrow?

With limited macro data coming out overnight, I suspect we will see the rally continue into tomorrow morning. I find it hard to believe people were positioned aggressively ahead of the elections. If anything, the fact that the elections came in “more anti-establishment” than expected and the markets refused to stay down, is another sign that much was already priced in.

Germany does seem to be trying to play nice. Spain is playing some version of bad bank – worse bank, but the market seems to like it. The smell of government spending is in the air, and whether it results in growth, investors are excited. Even in Greece, initial fears are being replaced with some consensus view that they will do the right thing.

I suspect I will have cut some longs by the time U.S. markets open tomorrow, but think letting them run is the right trade, in spite of the fact that S&P futures are up more than 25 points from their overnight low.

Fortunately for me, HYG opened lower this morning providing a good buying opportunity, and I think the long bond short could work out very well.