The US retail investors wins the price for "best and boldest" soldier of 2020 (Laffont and Ackman get one Medal of Honor each (and >$1bn in bonus) but the rest of the hedge fund army, even though being up for the year have been crushed Little Bighorn style by Retail Army).
EPFR
Valuation ranges (MSCI Regions) over a 10-year timeline. 12-month forward price to earnings multiple
IBES / Factset
Much more room for increased Risk Appetite cross-asset, based on "GS Risk appetite indicator level and momentum factors"
Goldman
Classic equity sentiment indicators like flow and surveys flashing red warning signs. But VIX (and thereby CTAs, Risk-Parity etc) is not confirming. Will we need a massive VIX leg down and a tsunami of systematic buying before this bull-run is over or is VIX "Market Mistress" this time that will fool us from not going short when we should?
Goldman
GBP continues lower, but far from "panic" lows yesterday. Note the spike in 1 mth implied volatility stays at elevated levels. The most recent Brexit situation has seen a strong bid in vols, note how vols are at highest levels since April, despite the actual move in the GBP much smaller than what we saw in Sep (yes, the timeline now is very tight).
Brexit and Corona has seen the UK economy really take a huge hit (second chart needs no commenting …).
So far just a small move as an effect of the latest px action ion rates, but watch this closely should we start to see bigger moves to the upside. Equity protection has pretty much ignored this move in credit protection.
Refinitiv
US Financial Conditions have not been this easy in our lifetime…..
Goldman Sachs
10 year breakevens holding recent highs and real yields holding pretty much recent lows.
Let's see what happens longer term, but the second chart gives us some inflation "chills".
You – "coz this market refuses moving and my theta is eating me alive"
SPY 5 day realized vols explains it all. Realizing vols realizing nothing basically, and long gamma at max around 3700.
5 day realized vs 1 mth implied SPY vols.
Refinitiv
As we have been pointing out for some time, dealers are stuck with SPX long gamma but market is basically not moving. Frustrated by theta bleed, dealers are hedging long gamma (buying when market dips, selling when it moves higher) creating opposing flows and acting as a shock absorber, both ways, at an increasing pace.
SPX has moved some 1.6% max low to max high in December. This is basically no moves and long gamma dealers are seriously questioning their logic of being long gamma in the SPX. More Chinese water torture as theta stays huge as we are very close to max long gamma exposure (chart 2).
Meanwhile we are seeing huge call options mania in names like TSLA, PLTR etc leaving dealers short gamma, resulting in losses as underlying moves have been huge.
Let's see if frustrated dealers start puking index protection at cheap(er) levels soon…
MOVE has moved sharply higher, while VIX has continued to hold near recent lows. VIX itself, is not dirt cheap as realized vols have stayed relatively low, but there are still a lot of potential risks to consider, keeping the VIX with a "constant" bid.
Refinitiv
Seasonality looks good for December and January. And February, March and April…..It is a long way to "sell in May" – that has not worked anyhow for a while. Long-only for longer…..
Barclays
Front running the “January effect” inflows has been pulled forward. This is the largest flow dynamic in the market. Equities have seen the largest monthly inflows on record. And this is before the yearly allocation back into equities (think 401ks) each January (33% of the INFLOWs on the year).
Goldman
Yields up, Russell up, yields down, Russell up.
Talk about the Midas touch…
Refinitiv
German 10 year does not care about no vaccine boost. Note it is trading where "it" all started, pretty much at pre Pfizer news levels.
People are bullish Europe and ECB printing more, but Europe is stuck in Japanification and exiting seems far from here.
Central banks just hit new ATHs at €6,923.1bn, to 68% EZ GDP, Fed's 34.1% and BoJ's 130.9% (chart 2).
Time to manage some of that European banks exposure here? Surging banks and crashing yields has not worked in Europe for a long time… (chart 3).
After tech earnings had outperformed overall market earnings by 100% in the preceding 5 years (1995-2000) tech earnings hit a brick wall and gave back a lot over the next 2 years. Now tech earnings have outperformed by over 100% over the past 5 years and just started to take a pause / give back a little. Seems totally implausible that tech would not continue to eat the world……but what if history whats to rhyme a little? (this of course totally ignores valuation which is not nearly as stretched as it was in 00)
JPM
In 2009 it managed popping higher in late December.
As Nomura's Charlie writes today;
“the ‘right-tail’ CRASH-UP scenario remains very much the more likely ‘play’ due to bullish/supportive options flow dynamics into Quad Witch Op-Ex and VIX expiry.”
Why not?
Refinitiv
(only difference that it is true). Hopefully New York will experience similar trend to what Europe is seeing in the 2nd wave – with deaths much much lower than in 1st wave.
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