From Nicholas Colas of DataTrek Research
Why do global equity markets ignore political shocks like Brexit, President Trump’s election or the news that Angela Merkel failed to form a government in Germany? There are plenty of good reasons, actually, which we review below.
Authored by Steven Vanelli via Knowledge Leaders Capital blog,
With some exceptions, smaller-cap stocks in the US tend to pay higher taxes than their larger-cap peers. As such, speculation that corporate tax rates may be cut has stoked the performance of US small caps recently.
[ZH - and in recent days - tax hope appears to have faded fast...]
Yesterday when we discussed the dramatic crash in the Turkish lira, resulting from the visa suspension drama at both Turkish and US consulates, we noted that "this is the currency's seventh consecutive decline, after dropping on Friday amid concern Fed tightening would hurt EM currencies, and should it persist may finally have an adverse impact on other EM currencies, not to mention various other local Turkish asset classes when markets reopen in a few hours."
While so far the rout from the North Korea crisis has impacted global volatility first and foremost, with the VIX surging 50% (a rather pointless metric considering where the VIX was just days ago) on a modest drop in the S&P which earlier this week was making new all time highs, as massive short vol positions have been rapidly unwound, one trader believes the next place of impact is the sector which has so far emerged, so to say, largely unscathed from rising risk concerns: emerging markets, the clear outperformer so far in 2017.
In an eventful overnight session which saw a historic transition in Saudi Arabia, an unexpected Republican victory in the Georgia Special Election, China's inclusion in the MSCI EM index and Travis Kalanick's resignation, S&P futures continued to fall, alongside stock markets in Asia and Europe, while oil prices extended their drop despite a larger than expected draw reported by API on Tuesday.