(New York)

What is the biggest short-term risk to markets? Is it a recession, China trade relations, and EU meltdown? None of the above. Rather, it is the upside risk of better economic data. A short burst of good US economic data, and the resulting comments from the Fed, could send US bond markets into a tailspin after the huge rallies of the last several weeks. The market for long-term Treasuries looks overbought, which means a reversal in economic data could bring a lot of volatility which could even whiplash equities.

FINSUM: At this point, a round of good economic data, and a stray hawkish comment from the Fed, would deeply wound bonds and hurt equities too (because everyone would again grow fearful of hikes).