I would like to begin with a prayer for all of our Wedbush colleagues in Santa Rosa, one has completely lost his home. Another, Mike Sims (long time President’s Club member) is preparing to evacuate and Gina Balestrieri (one of our most prized colleagues) has been evacuated to a hotel room. We wish them the very best and hope that life returns to normal ASAP.
I believe one story getting little attention could have a sizeable long term impact on the market and that is the upcoming election in Japan, the opposition party is promoting a change in monetary policy…
Tokyo governor’s new party vows to scrap over-reliance on fiscal, monetary steps – Reuters
- Reuters reports Tokyo Governor Yuriko Koike unveiled her new party’s (Party of Hope) policies that it dubs “Yurinomics” that aim to revitalize the economy and cut reliance on fiscal spending and monetary easing, seeking to distance itself from premier Shinzo Abe’s more aggressive stimulus measures.
- The party is also calling to freeze a scheduled sales tax hike in 2019. It is seeking to end nuclear power by 2030 amid public safety worries after the 2011 Fukushima nuclear disaster. It will also consider taxing big firms’ massive internal reserves – worth around ¥300T ($2.66T) – to fill a revenue shortfall and encourage them to put unused cash to better use.
BoJ Governor Kuroda’s chance for reappointment may hinge on election – Bloomberg
- Bloomberg discusses the outlook for BoJ Governor Haruhiko Kuroda, which has been clouded by the lower house election. The story suggests that while Prime Minister Shinzo Abe’s Liberal Democratic Party is expected to attract the most votes, even a significant loss of seats in parliament could weaken Abe’s hand, lowering the chances that Kuroda will be reappointed when his current term ends in April.
The BOJ has been perhaps the most aggressive in providing monetary accommodation, if that stopped it could start the ball rolling, however right now…
LDP remains front-runner: A Yomiuri poll conducted Oct 7-8 showed the Liberal Democratic Party’s approval rating was 32% compared to 32% in the previous survey in late September. Support for the Party of Hope fell to 13% from 19%, while the Constitutional Democratic Party stood at 7%. Undecided voters accounted for 27% versus 25% prior. The Abe Cabinet’s approval rating declined to 41% from 43%.
If the LDP loses the election I believe it could prompt a sell off worldwide. And further if Japanese monetary policy changes it will eventually impact all asset pricing IMHO.
Evidently it really is a market of stocks….
Implied correlation of top US stocks hits all-time low -WSJ
- The WSJ reports the one month implied correlation for the 50 largest US stocks last week fell to an all-time low at 9%, far below the 44% average stretching back to 1996.
- It notes this environment tends to be viewed as a favorable one for active stock pickers and comes ahead of the beginning of Q3 earnings season.
- It adds that correlations have largely been on the wane since the middle of last year, taking a leg lower after the US election. The actual correlation of the biggest 50 US stocks over the past month ended last week at 7% and in August matched 2000’s all-time low of 3%.
- StreetAccount notes the FT reported last month that equity-focused hedge funds are outperforming peers as correlations weaken.
And optimism is at literally an all-time high….
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