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‘Angst everywhere’ as investors search for new market trends

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Financial Times columnist Jamie Chisholm cites strategists noting "angst everywhere" among major institutional investors,

"There's an abundance of angst this morning, stemming from weak US car data, the explosion in the St Petersburg subway, the prospect of Donald Trump meeting Xi Jinping at the end of the week and the rapidly approaching French election. The mood … has taken bond yields, equity and commodity prices lower to kick off Q2. The only cure is a steadying hand from US data that will put a floor under bond yields and, given how low that floor is, send money off in search of yield again. But for now, angst everywhere."

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Markets do feel a bit odd at the moment. The post-election reflation trade has been largely unwound, but hasn't collapsed. Markets are looking for new trends and not finding them while political risk in the U.S. and Europe intensifies and investors cross their fingers and hope China's debt bomb doesn't implode.

"'Angst everywhere': Nervy tone returns to markets" – FastFT

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Bloomberg highlights a "collapse" in U.S. auto sales that has obvious implications for central Canadian economies,

"Ford Fusion: down 37 percent. Chevrolet Malibu: down 36 percent. Toyota Prius: down 29 percent. As those grim numbers suggest, the U.S. auto industry was blindsided last month by just how fast sedans have fallen out of favor with Americans now embracing roomier sport utility vehicles. Family-friendly crossovers may be more profitable, but the quick shift is causing headaches."

"U.S. Car Demand Collapses in Threat to Trump's Factory Push" – Bloomberg
"Here's why it's getting harder to ignore rising subprime auto defaults" – Marketwatch

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Investor anxiety is also apparent in the energy sector as the oil price rally stalls on renewed exports from Libya,

"'It seems that the stoppages in Libya appear to be shorter in nature, less protracted,' Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. 'The faster it comes back, the effects in terms of price are less lasting. That leaves the oil market in the same sort of conundrum as it was before, which is, what is OPEC going to do?" The group will meet May 25 in Vienna to make a decision on whether to extend production cuts.'"

"Oil Rally Fizzles as Prices Made Vulnerable by Libyan Recovery" – Bloomberg
"Oil Traders Drain Hidden Caribbean Hoards as OPEC Cuts Bite" – Bloomberg

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The New York Times underscores the general overconfidence of investors by detailing the psychological biases that mean we are all likely nowhere near as good at investing as we believe. These biases are overconfidence, optimism bias, hindsight bias, attribution bias, and confirmation bias. I was most struck by the commentary on attribution bias,

"When events unfold that confirm our thoughts or deeds, we attribute that happy outcome to our skills, knowledge or intuition. But when life proves our actions or beliefs to have been wrong, we blame outside causes over which we had no control — and thus maintain our faith in ourselves. The Harvard psychologist Ellen Langer describes the phenomenon as, "Heads I win, tails it's chance.""

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"Why We Think We're Better Investors Than We Are" – New York Times

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Tweet of the Day: "@gusbaratta You grow childish citizens, you get paternalistic governments." – (includes link to Financial Times column) Twitter

Diversion: "About ethnic conflicts, inequality, and rainfall in Africa" - VoxEu

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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