Trade-related headlines continued to be all the market cared about for one final day this week. They went both ways, but by the end, it was clear we’d been hoodwinked into paying too much attention to a process that is destined to be ongoing and nuanced.
The day wasn’t without hope, however. The morning hours even saw an attempt to hit the most panicked levels of the week with respect to the trade war (i.e. low bond yields and stock prices), but both bounced after trade talks wrapped up with no dramatic fireworks. A few hours later, Trump confirmed that we’re looking at an ongoing, constructive process between two countries that have a strong relationship.
COULD HAVE FOOLED US FOR THE LAST 4.5 DAYS!
C’est la vie. That’s the nature of watching market movement as closely as we do. It’s no small consolation that volumes and volatility were incredibly elevated this week (in other words, we weren’t watching any more closely than conditions suggested we should).
From here, the most obvious risk is that markets return to their previous ranges. In fact, that risk is so obvious at this point that it wouldn’t be a surprise to see a contrarian trade early next week where a few traders with deeper pockets attempt to take advantage of lopsided short positions by trying to start a short-covering snowball. Not the kind of thing to plan on, but one to hold out hope for anyway.