Global View

Historically, sharp outperformance from utilities like we’ve seen produces about a 3-4 week window following the signal where conditions really favor a volatility spike. All of the major pieces are already in place and we could even see this volatility spike yet this week. The Bank of Japan is meeting this week and is unlikely to enact any policy changes.

It’s entirely possible, maybe even likely, that rate cuts are off the table until 2025. Once the concern turns into a sense of panic and/or something begins to break either in Japan or because of the war in Israel, that’s when the flight to safety returns and Treasury yields start moving lower. The biggest thing happening in the global markets right now is still Japan.

When you look at the totality of the current environment - utilities are rallying in spite of other defensive sectors heading the other way, lumber is nose diving while other commodities are running higher and gold is experiencing a parabolic move up - there are a lot of risk-off signals flashing warning signs. The dollar has a couple of catalysts in front of it that could move the currency in either direction.