Macro Trader Warns "This Might Be As Good As It Gets" For US Investors

Tyler Durden's picture

As credit and equity markets continue to grind higher with monotonous regularity, as bloviators fret about politics and analysts await clarity on monetary and fiscal policy, Bloomberg's Cameron 'macroman' Crise is worried that "this might be as good as it gets for US investors."

As Crise explains, one of his favorite metrics is one-year trailing return to volatility ratios in major markets, which mean-revert and thus can provide early warning signals for when things get extended.

Typically, high-yield credit markets top out at a ratio between 4 and 6, while anything above 2 for stocks suggests that the S&P 500 is looking toppy.

Those readings are currently 4.1 and 2.3, respectively.

As is clear from the chart above, each time (2004, 2007, 2010, 2011, and 2015) saw a notable reversion in the US equity market.

As Crise notes, it’s pretty rare to see markets perform this way.

There have been 76 days this century where the IBOXHY ratio is above 4 and the SPXT ratio is above 2 -- that’s just 1.8% of all trading days.

Does this mean that today is the peak and that it’s all downside from here? Of course not. (IG credit, for example, does not look at all extended by this measure.)

I would suggest, however, that if monetary conditions tighten notably or Trump over-promises and under-delivers, the halcyon days could come to an end very swiftly.

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NugginFuts's picture

and I'm curious what it would take to actually topple this market. A meteor hitting the White House couldn't stop the bull at this point. 

edifice's picture

Usually, when people start bandying about phrases like 'paradigm shift' and 'nothing can beat this market', is about the time it crumbles. Not saying you, of course--I know you understand this--but 'investors' in general.

NugginFuts's picture

Fed rate hikes,

Build up of oil and gas,

Lower/slower wage growth,

8% reduction in mortgage applications m/m

Reduced NAHB confidence

Sub 2% GDP print

-.3% production growth m/m

The only thing propping up the markets is some guy in the White House saying "massive tax cuts and deregulation" and the market wets itself in hysterical applause.


Every dip is BTFD until Dow hits INFINITY AND BEYOND!

evoila's picture

the more it goes up without reason, means the more likely it is to crash without reason. 1987. 

Ludwig Van's picture

That's exactly what I'm thinking -- fast and deep.

vollderlerby's picture

Hard to argue against your point.  As long as the sheeple are running uphill, I won't stand in their way.  Trailing stop loss from 10% off the peak.  Would havve sucked to miss a 200% or 300% runup since 2008.

Running_Trillion's picture

"macro trader" my ass

buzzsaw99's picture

one-year trailing return to volatility ratios in major markets...

holy fuck! lolololololololol

shizzledizzle's picture

Macro trader?! Is he the last one left in the wild?! 

onthedeschutes's picture

Funny...traders still trying to use metrics.  The only metric worth paying any heed in this so called "market" is how much ink is left in the Feds printing presses.  The Fed, along with it's foreign central bank counterparts ARE THE MARKET now.  You can ditch your old playbooks.

DavidC's picture

Printing presses? How quaint! I thought it was monkeys pressing the zero key on keyboards.


newmacroman's picture

Is this the dinglenuts that was banned from ZH awhile ago?

I couldn't register as macroman (handle I have used for 20 years in other forums) and had to put lame ass "new" in front.

lasvegaspersona's picture

Can I count on DOW 3000 by July 4th...cuz papa needa new pair of shoes....

common lucky DOW!!!

Hohum's picture

Too bad.  Shoes too expensive.  Or, in the new spelling, to expensive.

SeuMadruga's picture

In line with our current "fake" era (fiat "money", "gold" futures, honesty, fairness, etc), my boldness might also be just "on paper" as I simply don't have the balls to be a contrarian amid the rotten carcass heap of traders stubborn enough to dare shorting this madness...

EX-floor hedger's picture

When Yanet Jellen takes her finger off of the stimulus trigger, stock futures will drop like a 'thief in the night'...