In the September update, we said that Santa was coming back this year for a variety of reasons. After a bout of mostly dampened volatility starting October 7th, the S&P 500 has seen the largest 4 day rally since 2022. And, over the course...
[Read Full Post]Despite what we hear from many prominent traders like Ray Dalio and Paul Tudor Jones, we don’t believe that the events on October 7th will lead to a wider regional war. None of the big players in the region (Iran, Saudi Arabia, & Iranian proxies like...
[Read Full Post]It doesn’t mean that there must be higher odds in July. August isn’t more probable. Flows are tied to windows. If they don’t transpire during those windows, it actually tells you something. The probability of something happening is conditional on some...
[Read Full Post]Since our last post, despite the bearish macro backdrop, the market is up 15%, erasing losses since the Russian invasion in Feb2022 while interest rates hiked at historic pace from 0.25% to 5.25%. We stated very...
[Read Full Post]Contrary to popular beliefs, the feds telegraphed this, understood in real time what was happening with SVB and Signature bank. They were really quick, as soon as the decline happened, they come in and secure depositors. We believe...
[Read Full Post]Everybody is worried about a recession that will cause a decline in the market because of layoffs leading to reduced spending leading to reduced earnings, etc. But that is not what drives markets. We’ve observed below trend economic growth for more...
[Read Full Post]Reinvestment flows worked in reverse this year and paired with tax loss selling flows can be very significant into the EOY and BOY. That being said, the market handled it very well given the vol compression flows...
[Read Full Post]The world is long 450T in assets. When the market is up on average 10% a year, the world gets 45T reinvested. Perhaps 10% of that comes back in the market on the first day of January, so along with flows due...
[Read Full Post]The bastion of liquidity, the place where the world comes to hedge, the 10,000lbs gorilla maintaining world peace, is seeing the thinnest liquidity ever recorded. This is a long term warning sign as other places are incredibly volatile. The depth of the market is...
[Read Full Post]It is common knowledge at this point that positioning is very short (like, record short). This year has been a tug and pull between bearish macro flows and positioning underpinning the market and compression of vol. We continue to expect more stair steps...
[Read Full Post]As the S&P and other markets rallied 20% off their lows since late June, we’ve gradually forgotten the mantra: don’t fight the fed. As 10Y yield is sitting at 2.8%, 2.5% below trim CPI and trimmed PCE deflator (running 4-6%), William Dudley, ex-ny fed chair,...
[Read Full Post]Equities index is the last bastion of liquidity in the market. There is no liquidity in the interest rate and bond space anymore. FX has lost all its liquidity and we’re seeing that in the movement in vol. Tech, crypto, credit spreads are also widening dramatically. So watch equity vol...
[Read Full Post]Long term expectations of inflation remain high (1-3 year):
Back on October 25th 2021, we spoke about an eventual unhedged risk-on push to a blow off top kind of rally to end this 40 year long cycle. SPX 4800 was a very non-traditional top. Normally, due to the potential energy in the system at the end of a big...
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