Iran will get a new head of state, and warrants are being sought in the ICC. But broad equity markets keep ticking up. Is geopolitics priced in? If this is the case, it could imply two things; (1) equity positions are sufficiently hedged that net portfolio delta is neutral, or (2) equity allocation is at the minimum of what institutional investors can tolerate.
This could explain the continued grind along the top of the trading range with the continued high RSI. I haven’t looked at the internals of the market, i.e. how sectors have performed. I’ll update and post the analysis later today. Also, Q1 2024 hasn’t shaped up badly: is this fundamental strength supporting the market? I don’t really know where to find corporate share buy back announcements so I can track them.
Further, macroeconomics have not disappointed yet; PMIs haven’t come in worse. This has prolonged the higher interest rate environment, putting off any rate cuts. So if things get worse, central banks have “dry powder”, i.e. there is room to cut rates to back-stop any major sell-offs.
So, geopolitics is the only factor that may put a lid on markets. If this lid disappears, are we looking at blue skies?
Eurostoxx 50 is within the top 1/3rd of its weekly range, and RSI is above 70.
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