European equities just sw their biggest infow since December 2015, ironically coming at a time when according to DB, the 6-month change in PMI will be negative by June "even if the April flash-implied level of 53.7 holds, which would be consistent with negative equity price momentum"
With the dollar bouncing back and bond yields and breakevens rising, RBC's Charlie McElligott 'sniffs' that the market is trying to convince itself to turn "cautiously constructive" again on Trump tax movement. However, as he details below, there are a few red flags to pay attention to...
"When all passive funds weights are added together I get over 50% of Simon Property Group shareholders are passive. I wonder who will become the buyer if all these funds start to see redemptions if there are some problems in US commercial real estate?" - Horseman Global
RBC's head of cross asset strategy Charlie McElligott dons his full wonksh equity analyst hat today, exposing "The April Effect," and the specific risk of "nasty double whammy" of levered long-short unwinds should momentum stall.
'Long Dollar' trades are currently seen unwinding ‘real-time’ as ‘the world’s most crowded trade’ and ‘reflation’ proxy earlier this evening broke the convergence of both its 200dma and the 76.4% Fibo Retracement of the entire Dollar move since the US election—exposing significant downside. There will be major implications within equities too.
"The future is bimodal with volatility to be found between politics vs. policy... Either political bottlenecks clear and the stimulus gets approved and goes full force leading to higher growth potential with structural steepening of the curve, or political tensions effectively sabotage either its arrival or content (or both), and the curve initially bear flattens or even twists with rate shorts capitulation accelerating the rally of the back end."