The Bond market is trying to front run the Fed (as usual), while traders trying to front run China are finding a more determined adversary. As we used to see with FX markets, monetary authorities will intervene to push markets in the direction they want, but only when they are already going that way. Meanwhile, long term investors can take advantage of distressed selling by speculators to buy on the dips.

While there was an initial attempt at Sell in May and Go Away, as far as equities were concerned the selling by leveraged retail traders was largely countered by buying on the dips for quality stocks from longer term investors.

With the G7 meeting in the UK coming up next week with a focus entirely on ‘Carbon’ and politicians everywhere seeking to out-compete one another to be ‘greener than thou’ it is probably no coincidence that this week, Bill Gates and Warren Buffet announced they were going to build a ‘new’ type of Nuclear Reactor in Wyoming.

If we only look at the top-down numbers for Asset Classes we risk missing the underlying stories and information that is ‘out there’. Thus while April saw something of ‘A reversal of the reversal, as we discussed in the May Market Thinking, the first week of May has seen something of a re-establishment of those November to March trends. Essentially the reflation trade remains in place.

Market movements in April might best be described as an apparent ‘reversal of the reversal’ as many of the winners of the inflation/reflation trade that began in October appeared to sell off while the ‘losers’ rallied.