Stocks were lower to start the trading week. The Dow closed with a mild decline of 19 points to 20,052. Trading volume was weaker than a kitten.
Bloomberg had an interesting article summarizing a research note from Bank of America which discussed US markets and the divergence of indicators showing low volatility versus the rising costs for downside risk protection. The gap between these two indicators does not make sense since low volatility usually corresponds to lower downside risk. What I found interesting about this article is that it compares low volatility in the US against rising uncertainty in global markets specifically Europe with its upcoming elections coupled with the Brexit issue in the UK. The report could be further evidence that despite headline policy risk in the US and Europe, the underlying US economy appears in good shape. This could reinforce the notion that the US is an “island of prosperity” compared to Asia and Europe. Only time will tell how this pans out but it “bears” watching.
Gold hit an 11 week high today as the US dollar weakened following last week’s Federal Reserve meeting which did not raise interest rates. Gold bullion is also being soaked up by Europeans who might be trying to hedge Brexit risk and the upcoming elections in several eurozone nations. Offsetting this somewhat is falling demand for gold in China and India. At the close gold finished up $16.50 an ounce to $1,237. WTI crude oil was off 1.4% at $53.07 per barrel.