“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness,” Charles Dickens states. And further, he writes that describes the detachment between political action and market action as we enter the next week.
The fact that the U.S. government is shut has raised concerns that it will negatively affect the rest of the world, though it appears not to have dampened the risk-on environment in key equity markets.
The political impasse in Washington, D.C. appears to persist into next week, with fears that the Trump administration might use the funding freeze to permanently cut positions and abort some of its projects.
Even as stock market researchers have been busy speculating on what a prolonged closure would entail, the major U.S. and European indexes have been registering all-time highs.
This is amidst Bank of America fund flows figures indicating that it transferred $26 billion into global equities at the end of the week leading up to October 1, with an all-time high of $9.3 billion into the technology sector.
More market players are also raising concerns that there is a bubble in the market in some segments and that this may cause a bigger market correction.
Saxo cautioned, stating that “don’t predict, prepare.” Bank added into this matter that “the mood could hardly be more conflicted. Equity indices hover near record highs … yet consumer sentiment remains close to historic lows,” encouraging investment diversification to avoid instability.
The credit markets are experiencing red flags. Meanwhile, Barnaby Martin of Bank of America reported on “Squawk Box Europe” that their recent survey indicated that credit investors had one of the “biggest overweights ever in the 20-year history” of the survey, and that there were growing concerns of market bubbles.
The U.S. car parts manufacturer First Brands declared bankruptcy last week, following the announcement of a $12 billion debt load that it had accumulated through off-balance sheet financing. Renowned Jim Chanos added to Financial Times that “suspects we are going to see more of these things,” he cautioned that the growing, broad-based private credit market is reminiscent of the subprime crisis.
The bubble that appears not to be under threat of bursting is the one that surrounds multi-award-winning pop star Taylor Swift.
Her new album, titled “The Life of a Showgirl,” was launched across the world on Friday after the fans had waited many months to get their hands on the album. It succeeded her record-breaking Eras Tour that made over $2 billion in ticket sales alone.
