We’re restarting a modified version of the Armageddon Trade. We tracked and monitored this trade on a daily basis during the last fiscal and debt ceiling crisis in the summer of 2011. We’ll follow the real-time market indicators listed in the table below to divine if sentiment is heading over the cliff.
No panic so far. Equities are being whipped, in our opinion, by expectations of a coming increase in capital gains/dividend taxes. The VIX is, surprisingly, lower than where it closed on election day.
What would a real fiscal cliff panic look like?
Stocks down hard; Russell 2000 down harder; consumer discretionary down hard; gold up; dollar down; VIX spiking; and defense stocks in the tank.
Bonds? Tough to extract a clear signal with the Fed’s financial repression, but, initially, the cowboys would most likely be in buying on recession fears and increased worries about going over the cliff.
We’re open to suggestions of more, or, better, real time market indicators. Contact us.
(click here if table is not observable)