One Trader Is Surprised At Market Euphoria From A “Result That Was Everybody’s Base Case”

The risk of a Eurozone breakdown now appears to be taken off the table after a French election that has led to a dramatic repricing in European risk assets. And yet the outcome – which was largely expected – has prompted Bloomberg’s Richard Bresow to muse just how much was truly priced in:
“I guess it shouldn’t come as a huge surprise. It truly unnerved the commentariat that the unpredictable seemed to be unpredictable. The second vote is apparently now knowable with certainty. Europe is saved. Populism is about to be vanquished. A strong euro is a good thing for the economy. And ECB President Draghi can begin normalizing rates. Presto chango. Not bad for a result that was everybody’s base case.” And yet, as Breslow adds, the wholesale reaction leaves something to be desired:
Gold is interesting. I’d have expected it to leak more than it did. It may require Treasury yields to push higher. As we speak, they left a nasty gap and sit right where the bulls were hoping they wouldn’t have to see anytime soon. This may be the most interesting asset of all. Equities are happy. Think of all that hard-earned wealth creation. And they get to ignore the Shanghai meltdown and potential U. S. government shutdown. Make tax cuts, not war. Another one-half percent higher in the E-mini and dreams of new all-time highs will be dancing in traders’ heads.

This post was published at Zero Hedge on Apr 24, 2017.