Then 1 to 2 million-44 days
2 to 3 million-27 days
3 to 4 million-15 days
4 to 5 million-17 days
5 to 6 million-22 days
6 to 7 million-25 days
7 to 8 million-21 days
8 to 9 million-14 days
9 to 10 million-10 days
"Major market risks have diminished in the past couple of weeks, sparking a rally in risky assets but clearing the path for significant further gains. This week’s positive vaccine news is a game-changer in our view, as it allows the market to look through the recent surge in COVID-19 cases to the impending end of the pandemic and broader reopening of the economy"
"We expect equities to continue to rally, and bonds to sell off. We further increase our OW in Equities, and maintain OWs in Credit and Commodities vs. an UW in Government Bonds and Cash"
Chart shows weekly equity fund inflow (in $bn). Retail wants to join the year-end melt-up party. Hedge funds and AAII already all-inside
EPFR
Over the past two weeks, consumer activity measures declined throughout Europe. Restaurant bookings collapsed in Ireland and Germany amid restrictions and edged down throughout the rest of Europe. Mobility at retail and recreation as well as at transit stations declined globally driven by European lockdowns.
There is a strong correlation between falling temperatures and rising case growth
National Oceanic and Atmospheric Administration
Monday was the start of many pundits talking about yields going higher as the vaccine news hit the wires. Vaccine vs lock downs, and the question remains will US lock down eventually?
Still a lot of questions with regards to the big yields question.
We at TME remain in the US 10 yr consolidation camp for some longer. We see 1% as the magical levels and we are not getting excited until yields possibly break above those levels.
Nordea's chart below is worth having in the back of your head as the slightly longer term chart.
Second chart shows Chinese vs US 10 year, also worth keeping in mind…
For rate clues watch XHB, RPAR, HYG and the DXY.
Earnings have been flat for 2 years, but the market has been in full melt up mode.
QQQ vs US 10 year inverted needs little commenting, but it is all a huge rate bet.
Second chart shows earnings stuck since rates started crashing.
Tech is a huge duration trade. The sensitivity chart below show this clearly. As Saxo Bank concludes;
Technology is 80% bet on rates, 20% on continuation of market share, margin.
Saxo Bank
Why a tech investor needs to look carefully at rates. As Saxo Bank points out, "Microsoft will lose or gain 544 bn. $ of market value on 100 bps move!"
Tech giants like MSFT are extremely sensitive to rates.
Maybe that bid in NASDAQ vol is not that "irrational" after all (second chart)?
1. Retail Trading Favorites Index is trading at an All-time high, up +110% since March.
2. Retail Trading Favorites up +14% in the past 6 trading days.
3. Wednesday saw record retail volumes. Charles/Vanguard/TD/Fidelity/Robinhood/ML all reported high volumes/slowness on portals – according to downdector
4. The most discussed topics on reddit thursday: JETS – Global Airlines options, BETZ – Sports Betting, and MJ – Alternative Harvest.
Chart: Households have a 41% allocation to equities, which matches the recent high set in 2018 but falls shy of the 47% record during the Tech Bubble.
A 1 percentage point increase in that allocation would be worth about $1 tn of buying, or about 3% of SPX cap.
6% increase in equity allocations back to the highs would be ~$6T
Goldman
VIX term structure today vs VIX on Oct 28 which was the highest close since June.
"Vol yield hunting" caught many wrong over past weeks. We are now waiting for the young quants to start telling us vol will not move so get involved in more "vega neutral" theta collecting trades before we start getting excited about long vol trades.
vixcentral
Record close for S&P, despite Fed's balance sheet still "stuck". One thing is sure, as BofA pointed out, Treasury supply is outstripping Fed purchases going forward(chart 2).
With SPX closing at record levels today, here is a little timeline of how Fed saved markets.
There are no new big narratives, but people are getting very bullish, positioning is very bullish, vols are offered and markets are discounting good times.
Markets are always forward looking, but are investors getting a little too complacent here?
GS
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