Learning curve

The market is learning. Algos are supposed to react instantaneously to news regarding the iranian conflict, and they do, but now they have learned when they’re being played. Here’s the tune: oil futures go down when Trump announces a peace deal, and go up when he hints an attack is imminent. But now right after the comments, once they realize they are being played, they react instantaneously, and go back to waiting mode. Same thing with the 10 year Treasury. Those are the two variables that matter to Trump: oil and the 10 year Treasury bond (and his approval rating). Hormuz is still closed and President Trump has announced a truce until Monday April 6th, at 8 pm EST (Easter Monday). Mortgage rates are going up in the U.S., and the odds for a rate hike are also trending up. At the beggining of the 5th week of the conflict, there isn’t a clear end in sight, and the world has not managed to adapt to the oil shock. Unlike the algos, the world has not learned how to deal with the new (dis)order.

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