Can we please move?

Consensus on board the "Fat & Flat" train...

Morgan Stanley reports that clients broadly expect a range trade at the index level but with low conviction levels (3800/4200 range). Mike Wilson notes that there is little appetite to dive back into areas that have underperformed like small caps, regional banks, and lower quality cyclicals … large cap tech remains well owned + little demand for traditional defensives. (Morgan Stanley)

Casualty of boring

Last week Nomura's McElligott showed that options sellers are back as "winners". Index is extremely boring, and theta panic is kicking in big time. Chart shows the SPY and the SPY June 411 call since early April.

Source: Refinitiv

Macro is dead

Barclays points out that the 1 vs 30 day vol drop "suggests that macro catalysts’ grip on the markets may be fading". The agressively unchanged narrative is truly impressive.

Source: Barclays

All eyes on the debt ceiling

All eyes will probably be on the twists and turns of the debt ceiling negotiations. Interestingly enough, that probably isn’t too bad for the market. Looking back at the last three near misses we’ve seen, only one of them led to significant underperformance. And while the current market trajectory most closely matches 2011, the SPX didn’t really plunge until the S&P hit the US with the a downgrade…after a deal was made and the total outstanding debt jumped.

Source: Jefferies

Source: Jefferies

One Theme to rule them all

1. "GOOGL is moving faster than expected as many of its newly announced AI features/products are rolling out over the coming weeks and months. Successful integration of these new AI features into Google's 6 products that serve over 2bn users, and 15 products that serve more than 500mn users should build further confidence in AI driven upside to come."

2. "...In terms of AMD's share of that opportunity, it seems more tangible and durable than our initial expectations....we are moving our base case for the AI opportunity for CY24 from $100 mm to $400 mm, and introducing a bull case of $1.2 bn. This is strictly for AI..." (MS Research)

AI at a discount

"We see the potential for GOOGL to narrow its valuation gap vs. peers. GOOGL's long term average P/E premium vs. MSFT/META/AAPL was 15-20%. Over the last 5yrs, its traded roughly in-line with peers."

Source: Morgan Stanley

That record short

Funds are short a record net 749,885 2-year treasury futures, a record net 910,462 five-year treasury futures, which together with a net 731, 698 short 10 year treasury futures – (just short of the record) – puts the combined net short at a record 2.39m contracts, or 239bn at par.

Source: Macro Strategy

Got yield?

EU equity dividend yield now below HG yield for the first time in many years. Chasing equities doesn't look too attractive according to JPM.

Source: JPM

The bull in bankruptcies

Not that equity markets care, but we are seeing bankruptcy levels not seen since 2010.

Source: JPM

Never forget the big one

This time is probably different, but can we afford to dismiss that 2011 debt ceiling chaos? 2023 vs 2011 pattern (in %).

Source: Refinitiv

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