This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Global Macro: Shutdown Brings Volatility

NEW YORK ( TheStreet) -- The second day of the U.S. government shutdown on Wednesday brought more volatility to markets than the day before.

Trading began in the New York session with a strong selling in the U.S. dollar, large buying in the long-dated Treasury bond and quick drops in equity indices.

Although lasting macro consequences such as default on Treasury debt are unlikely, the polarization in Washington reveals troubling truths. A nation with a government unable to accomplish even the smallest of tasks doesn't bode well for the fiscal or monetary future of that country.

The global economy is on a gradual path to recovery, with some overhead resistance from structural issues. The introduction of an avoidable geopolitical risk complicates things further.

The first chart below is of iShares Barclays 20+ Year Treasury Bond (TLT).

The long-dated Treasury bond is in an upward trend for various reasons. The Federal Reserve's commitment to buying Treasuries is a main one, while the political issues in Washington are also aiding in the move higher. The debt has been a safe-haven place to invest funds, and as was seen Tuesday, large bids can flow in quickly when investor fear spikes.

The long bond presents an attractive asset as long as geopolitical risks remain, and the bond is also somewhat safe from drastic selloffs due to the Fed's purchases.

The next chart is of the USD/JPY currency cross.

The dollar had a broad selloff against various currencies Wednesday morning. The higher bond prices weighed down interest rates which was negative for the dollar. Similarly, the dollar was sold because investors were wary of holding risky U.S. assets. One might question under that logic why weren't Treasuries sold as well.

The answer is that even with a crisis, U.S. debt is among the safest and most creditworthy investments, which leads to large investor bids.

The long dollar advocates prior to the September Fed meeting are far gone now, and as long as the debt ceiling remains an issue for financial markets, the dollar and equities are vulnerable to sharp corrections lower.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
TLT $128.86 0.32%
AAPL $129.99 -0.33%
FB $79.50 -1.10%
GOOG $563.15 1.40%
TSLA $204.17 -1.50%


DOW 18,193.17 -21.25 -0.12%
S&P 500 2,110.49 -0.25 -0.01%
NASDAQ 4,980.5780 -7.3120 -0.15%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs