Financial markets are a sea of red numbers today as the classic ‘Fade the Fed’ trade plays out. The initial reaction to last night’s interest rate decision was neutral to positive, then the selling set in and hasn’t stopped since. Yesterday’s rally did a very poor job of papering over the cracks in the global economy. Today those cracks wide open for all to see with housing and financial stocks hit hardest. Barclays in particular is back to square one, erasing all of yesterday’s gains as investors take a second look at their fund raising plans in light of Goldman’s predictions of further write downs for major Western banks. Citi Group has also been floored today on this news, falling to its lowest level since 1998. The twin evils of Gold and Oil are again the sectors in demand as investors seek to profit from further economic turmoil and hedge their bets against inflation. We see no significant change forthcoming until global indices revisit their March lows.
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