April 24, 2023
Good morning,
Well, Friday’s option expiration turned out to be a fantastic smoke screen, had no effect on low volatility, and was basically a wrong call – sorry about that. As if for good measure, Futures are off a whopping 10 basis points this morning (-0.1%) to start another week. It’s quiet out there this morning – there is no economic data and the FOMC members are gagged having entered their blackout period ahead of next week’s meeting.
The final week of April may begin slowly today but will heat up as month-end approaches. In addition to another slew of corporate earnings announcements, growth and inflation data will be released on both sides of the Atlantic, along with a BOJ (Bank of Japan) policy meeting – in the world of central banks, everyone is watching everyone else. That’s quite a few potential catalysts, so a bit of back-and-forth price action should be expected – which flies in the face of Friday’s smoke screen and the very low market volatility all month. Contradictions abound.
While the latest weekly series of bank balance sheet data showed a small decline in non-seasonally adjusted lending, that was a function of large banks– small banks actually saw a tiny uptick in loans. Deposits at domestic banks fell by some $49 billion, which was once again concentrated amongst large institutions, suggesting little lasting fallout amongst smaller banks from last month’s events. That, in turn, eases some of the concerns about an imminent credit crunch sending the economy quickly into recession (Bloomberg). The offset to that good news is, of course, equity investors possibly following the tradition of “sell in May” next week.
Be well,
Mike