Talking Points
• EUR/CHF collapsed after the SNB announced it was giving up its fight to maintain a 1.2000-floor
• With capital markets already on edge, the SNB's move may be another catalyst for risk aversion
• In the two weeks ahead, we have: China 4Q GDP; the FOMC decision and ECB decision amongst other events
Will an epic policy change by the Swiss National Bank prove the final straw for the S&P 500 and risk trends? We have seen volatility building for months while a slide of varying intensity for different asset classes conflicted with the 'status quo, risk-on' view US equities supported. These were slow - but manageable - cracks forming in a backdrop where leverage and excessive risk exposure have been used to compensate for unnaturally-low levels of return. Given the circumstances, a forceful catalyst can break the tranquility and force the reconciliation between positioning and fundamentals. Though the SNB is not discussed as readily as the Fed, ECB and BoJ; it was an important piece in the global monetary policy structure that has been intrinsic to stability. Between an unsettled risk backdrop and a loaded docket over the next two weeks, traders need to be on their guard for risk and opportunity. We discuss both in today's Trading Video.