David Hager, Bloomberg, Six Hundred One Day discussed on Bloomberg Markets
This is a special Labor Day edition of Bloomberg daybreak U. S. markets are closed for the holiday I'm David Hager coming up this hour what's the outlook for oil as the trade war takes a toll on sentiment plus political uncertainty in Argentina brings risk of another default and we take the temperature of retail heading into the holiday shopping season but first let's take a look at markets as we wrap up a month marked by turmoil and volatility joining me now Bloomberg macro strategist Vincent cigna rell and cross asset reporter loop calla thanks to both of you for being here on this Labor Day and look let's start with you is it safe to say that this market has been summed up by one word China. or tweets if you want like that yeah one one or two take it take it as you go but you know as much as we can talk about the the catalyst for to waive all the tell the this month really being inspired by trade in the kind of twists and turns and that narrative it's kind of important to to note how range bound the S. and P. five hundred has been this is been the ball the tile but very very sticky and it seems that we're just we're very sensitive to news that's a good one were very low when we're about to breach technical levels that you know investors don't want to think about falling through and we're very sensitive to headlines even if they might not mean much that are perceived as negative one more at the top of that range so this really does seem like a market that you know is using trade as a bit of an excuse to contain itself just because of the forward outlook is kind of sufficiently unknown and there's some big catalysts on deck from you know do you get a hard brexit does the ECB surprise with a big bazooka does the fed cut in the or signal cuts as much as investors want to come into earnings hold up to the fundamentals actually kick in so looks like we're kind of just using all this as an excuse to stay a range bound for now yeah we may be range bound events but it's got to be said I mean you look at the points alone on this range when you're talking about you know Dow six hundred one day and then falling four hundred the next day I on a point basis it's a pretty wide range at least on the face of it yeah as a bit of life shop as as Lou said you know the one of the things that we can look forward to historically tells us that September is actually a down month for equities and if you follow that prescription you'd be looking to buy dips into September because believe it or not October is a plus month psychologically people think of it as a down month because it's had some of the biggest drops historically that we have seen but it tends to be in the long run a positive month for. so the two things you could potentially look forward to for the next month or two is the opportunity to get long equities in September and to stay long fall going into at least to the end of October is that how you see it look to see past as prologue for this market given where we are with the US China trade narrative young being part of the story here I old of all the first events on the on the seasonality aspects but what I do see is a market that's still a very you know either one way or the other either we all go up together all go down together one thing that's really been a feature of August is been the very high rate of realize correlations among stocks so you know that simply means to what extent do the members of the S. and P. five hundred move together and there's that old kind of saying in a crisis correlations go to one well given what we gotta Q. four will be gone December that was those kind of those approaching crisis and realize correlations at this point in the S. and P. five hundred are actually higher than they were at that time I think that signifies just how much of a macro market this is at this point just how much we're kind of waiting for any kind of good news on the trade front or more so on the central bank front end you know to Vince's point it's it's fairly easy to see how how things can get worse whether that's the ECB not being not being able to stimulate pushing on a string we've kind of gotten some good bad reports that talked about the bank of Japan's experience with negative rates in trying to add stimulus in selling how that was counterproductive any of the C. B. could be heading for a kind of similar moment as well yeah it has been fascinating to watch the tied either raise or sink all boats in this market what point Vince do you start to think that different sectors will start to out perform well I think we need to wait until the least October first the seventieth anniversary of China I think what we're seeing right now is will. probably see a little bit of a calm before the storm if you will China has every interest to tamp down on markets keeping things under control at least until that point in a big party of big celebration don't want anybody to rock the boat between now and then probably the US administration has the same incentive to try to at least see things with China as potentially working forward it's good for the markets is good for the economy gives us a little optimism in terms of sector diversification that's a really hard thing to call I mean it really depends on which way the trade talks go going forward I think Vince made one very good point in there that's worth amplifying and that's the extent to which China is kind of hoping to tamp down on the escalation of the trade war and we we might end up remember in August as the month of that U. S. D. E. C. N. Y. did break seven broke that magical number everyone's looking for but if you look at how weak the Chinese currency should be from how the market views it relative to how strong that the Chinese authorities have been fixing it that counter cyclical factor they've been using to push back against market forces has been pretty consistently pointing to you know the Chinese currency is being propped up more than it should be and you know we you get the headlines saying they don't want to escalate but that's kind of been actions speak louder than words saying they are not really yet using financial markets to kind of weaponized the trade war as much as they could no that's partially because it's just not in their best interests yeah that's a good point I mean domestically they can't let the currency go very quickly to depreciate because it works against their own domestic economy setting up what could be a fascinating into the year Bloomberg macro strategist Vincent cigna relic cross asset reporter Lou kala again thanks to.