US Demand for Commercial and Industrial Lands Dips into Negative

The CBOE volatility index closed Monday at the lowest level since December 1993, but BofAML found that Wall Street’s fear gauge should be much higher because of its past correlation to an obscure measure of economic growth.

Demand for commercial and industrial loans, a leading indicator of growth, dipped into negative territory in the first quarter, Merrill Lynch said, citing the latest Federal Reserve Senior Loan Officer survey. Merrill found that periods of low loan demand have in the past been mostly associated with rising volatility, but that’s not happening now.

“It thus appears that the key post-election story continues — i.e. while optimism is high everybody is in wait-and-see mode pending details on tax reform from the new administration,” Hans Mikkelsen, credit strategist at Merrill, said in a note to clients Monday. “The longer this lasts the greater the risk of more weakness in hard data.”

Business and consumer optimism surged after President Donald Trump’s shocking election victory. The jump in optimism contributed to the U.S. stock market’s leap to record highs. The S&P 500 and the Nasdaq composite closed at all-time highs on Monday.

The CBO’s VIX, widely considered the best gauge of fear in the market, ended Monday’s session at 9.77 and was even lower in early trading Tuesday.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza