Optimism back in mkts

Today's trade may not end on a terrible note after a turbulent week. It is difficult to take a call on the last hour of the trade. There is an attempt to move up a bit and the investors are optimistic.

The US Federal Reserve meeting came as a non event; henceforth not much cues from the global markets are seen.

Today is the last day of what had been a truly dreadful series for the market. It may not end on a terrible note because yesterday there were some signs of a pull back and short covering. The market snapped back from the lows of the day. So we may end this series, which has been a really bad one in a slightly better fashion. There is hope that the market will move up a little bit in the near-term, having fallen so much. The Fed meeting overnight is a bit of a non-event. It has come and gone and the global markets don’t seem to have taken too much notice of it.

The Nikkei is okay, not too bad. The Hang Seng is up 0.75%, China is down 1%, Korea is up 1%, Taiwan is very flat so more green than red but nothing terribly convincing. It is a very flat response to what the Fed did overnight.

Q: How are we looking then on triple witching day?

A: Difficult to call the last one hour because it tosses around quite a bit and this time around there are a lot of shorts in the market both long and short rollovers have happened over the last couple of days. So the last hour of today’s trade is a little difficult to call. But generally the mood on the street is that we have probably overdone the bearish bit in the last week or so. The market has really collapsed quite a bit. From here, there might be an attempt to move up a little bit and try and stabilize in some kind of a reasonable trading range.

I do not know whether it will materialize but that seems to be what most people would be playing for right now. There may be a bit more of a pullback and then some stability. I think people are now approaching trade with a little more optimism at least from a trading perspective than they did a couple of days back.  

Crude is at USD 135/bbl now, it slid almost USD 5/bbl and then recovered a whole lot of that loss.

I think it is a bit of a pause for the global markets. The response to the Fed has been quite tepid partly because nobody expected the Fed to do anything. I think most global markets are now dealing with some of the bigger problems that face their economies and their markets and their companies.

I was reading a very good report from UBS suggesting that the four-year benign global growth cycle has probably come to an end. It came with a very beautiful graphic of how global growth has moved in patches of three to four years. It is absolutely astonishing, the way the whole global picture moves. It is a kind of a graph where you go through three to four years of a above trend growth and then almost inevitably followed by a two to three years of below trend growth and then again three to four years of higher trend growth and you can see those waves above and below the trend lines.

The big question a lot of people are asking globally now is whether that sweet spot of four years of growth above that trend line is now dipping below the trend line once again for the next couple of years. That assumes far more importance for earnings for stock prices, for general equity conditions rather than this obsession with 0.25% point here or there from the Fed.

It will assume importance at some point if inflation goes up and the Fed has no records but to raise rates. Here we could argue both ways on what the Fed is forced to do over the next many months. So I think right now global markets are dealing with that trillion dollar question on whether growth is about to taper off globally in the US, in Europe, in Asia, in India for the next one-two years and whether equity markets now need to start pricing them in even more than what they have done today.

So I think it is a pause-an important word-everybody is taking stock of what lies ahead for the next four-eight quarters.