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Talking Points:
• The stubborn S&P 500 has slipped to start the week and some see it as another confirmation of a risk move
• While a general turn in risk trends is possible overriding December market conditions is difficult
• If instead we are seeing a 'moderation' theme those effected and how far they go will be very different
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US equities slipped to open the week and anxious traders are eager to call a shift in broader 'risk' trends. A downturn from this stubborn benchmark counts for a lot amongst FX and macro traders. Considering this beacon of 'moral hazard' is led by dramatic declines in commodity markets a gradual rise in cross-market volatility measures and early turns from the likes of the Yen crosses; there is scope and means to the fundamental assessment. However it would be very difficult to rouse such a systemic shift in the traditionally-quiet year-end market conditions. An effort at 'moderation' - whereby market participants are cutting back on exposure - would likely mimic the early stages of risk aversion. But the follow through between the two scenarios would be much different. We discuss risk trends and monetary policy against the backdrop of a seasonal liquidity drain in today's Trading Video.
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