Formue

“Hvis udsigterne er så negative og stemningen så elendig, hvorfor stiger aktierne så?”

Uddrag fra internationale finanshuse:

What if we actually got a positive macro catalyst…..

….and not only rallied on “too depressed sentiment”? Yes, the inflation news has on the margin become a touch less worse and the recession fears also a touch less worse, but nothing really to explain what we are seeing now in equities (apart from that bear market squeezes can happen completely on their own for no apparent reason). What happens now if we get some really high profile mega cap beats and some better macro data…?

Sentiment knew (I)

From the latest BofA fund manager survey. Fund managers have puked risk across the board. When there is no one left to sell….

BofA

Sentiment knew (II)

Used to be a good time to buy around here (when it used to be a central bank liquidity driven bull market at least….)

Goldman

Sentiment knew (III)

Hartnett’s sentiment indicator: MUST BUY right here right now (but admittingly been saying so for a few weeks now but timing is hard…)

BofA

Bears have to hope that this time is different

“Over the past ten weeks,”small traders” have spent $39.7 billion on put options and $39.6 billion on call options. It’s extremely rare for them to spend more on leveraged, expiring bets that stocks will fall than they spend on bets that stocks will rise. It takes a devastating decline to change mass psychology this much, so the only two precedents were the two worst bear markets in recent memory. This flip in psychology also coincided with the bear markets’ end games. After a relief rally each time, there was another leg lower, but the bulk of the losses was already past”

Sentiment Trader

Nothing new on the illiquidity front

Top-of-book depth. 5-day average, $ mln

Goldman

If everyone is so bearish and the news flow is so uniformly bad, then why is the market holding up so well?

That’s the trillion dollar question…..Here is one way to try to make sense of it: “This is a very good question and not one I can answer with much confidence. If I was to have a stab at it….I think there is a confluence of factors. The reality that many investors are stuck in a state of paralysis, that for many there is no obvious alternative space to park any capital raised from selling equities and raising cash, that the universal bearishness has resulted in a right sizing of speculative length and that nets and gross exposure for the HF community at large remain at extremely low levels relative to history. Equity implied volatility remains dislocated vs FX and Credit, suggesting complacent equity markets vs credit and rates. The lack of Equity volatility for a world with xover trading at 600 is surprising to say the least. Also, without being the drill sergeant of doom, we should all be mindful of market seasonality for the coming month. August has delivered negative returns 7 of the last 12 years with an average -80bps contribution over the last 15 years making it the second worst performance month of the year historically. This is before you factor the extremely low top of order book liquidity we are witnessing currently…so a normal seasonal period of weakness could have an exaggerated impact” (Bobby Molavi, GS trading desk)

No signs of recession here….

No capitulation in estimates for Banks. In a recession, something which seems increasingly likely in EU & US, bank earnings fall between 25% and 50%. We haven’t seen any real signs of earnings downgrades yet, a normal precursor to a sector recovery.

Sanford Bernstein

This economic indicator NOT accelerating to the downside

Morgan Stanley Business Conditions Index (MSBCI) remained flat in July, as underlying details point to weak business conditions expectations as well as sluggish hiring plans, weighing on the index. Price pressures moderated in July, but remain elevated, and though MS analysts still report supply chain issues, many noted improvements.

Morgan Stanley

Economic surprises

Goldman’s US MAP index of economics surprises has been creeping up and now stands at -0.4.

Goldman

Inflation expectations keep grinding lower

Market based inflation expectations moved down last week after falling 120bp (5Y) and 30bp (5Y5Y) from their respective peaks, while the University of Michigan survey shows 5-10Y expectations dropped further to 2.8% (from 3.1%).

JPM cross-asset

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