We get almost nothing by way of data in the US or elsewhere today, meaning everyone is clueless about market prices. The FT’s bond market commentary continues to employ the term “bonkers” used by a fund manager to describe the irrationality of US yields lower while at the same time economic data comes out robust and bubbly–retail sales, even inflation, base effect not with standing. This summer we should see yields back up over 1.75% and climbing, if history is a guide, with pressure on the Fed to talk about tapering, the necessary precursor to a rate hike.

When we are bewildered and confused by an aberrant market response to data, either we are missing something or somebody is lying. Maybe “It’s the pandemic, stupid.” The rise in cases worldwide is scary, notwithstanding the success of some countries in getting large numbers vaccinated. For all anyone knows, the next mutation will not respond to the current vaccines. In the US, the State Dept considers some 80% of the world’s countries as too dangerous for Americans to visit (but remember Canada was the one to close the border with the US). And the anti-vaxxers are gaining ground with every passing day.

If the worst-case scenario happens–vaccines fail against new mutants and new mutants spread like wildfire–hopes for commodity prices continuing upward are dashed, along with commodity currencies. Yields everywhere retreat on the prospect of recessionary conditions. Jobs go away. Heaven only knows what equities do. That bastion of irrationality may get rational. Maybe the burst bubble is upon us.

This is not the consensus forecast. In fact, there is no consensus forecast right now. But there is positioning, minor though it seems at the moment. The real problem is that charting is a weak tool when Big Things are brewing. Remember how the charts got Brexit wrong.

Then there is discomfort on the geopolitical front, where the US is putting Japan in an uncomfortable position, as usual, by urging Japan to join the US to oppose Chinese coercion in the South and East China Seas. Before long, it might be joining criticism of the crackdown in Hong Kong and human rights abuses against Uyghurs. Gee, look where that is getting Australia on trade. At the Boao business forum, Pres Xi pushed back without actually naming the US, saying “The rules set by one or several countries should not be imposed on others, and the unilateralism of individual countries should not give the whole world a rhythm.” As the FT reports, China is at little risk of US ending globalism--American consumers are still materialistic and American companies still want to expand operations in China. Xi has a stalking horse–promoting global cooperation on vaccines--developing, manufacturing and distributing. Vaccines are “public goods,” Xi said. Yeah, like Hollywood copyrights on movies.

Paring positions and feeling cautious is likely the best idea right now.

This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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