Nobody knows nothing
Sentiment set-back (or set-up?)
Pullback in sentiment inline with the market’s recent pullback. Bull-Bear spread lowest reading since pre-June.
Source: Bloomberg
Recession, was that you?
Maybe the red bars were the recession everyone keeps forecasting? Stock market for sure has its "recession mandatory" 20% drawdown around that time. Or is it as Rosenberg shows, that it takes on average 22 months after first rate hike to show up (2nd chart)? Recession, are you in the rear-view or front-view mirror, or are you with us in the room right now...?
Source: Bianco
Source: Rosenberg
Most bearish in 2023
Options flow at most bearish in 2023. So everyone is hedged now....?
Source: OCC
Source: OCC
CTA Tsunami
>$200bn to sell if we "only" do down 1 sigma from here. If it goes down a little it could go down a lot...but that analysis has not really worked so well during 2023....
Source: Scott Rubner
Mother of all sell-signals! Do not fear it...
The S&P 500 is now below the 50-day MA for the first time in more than four months. This by itself isn't a reason to turn overly bearish. Since 1990, the S&P 500 is higher a month later 8 of 9 times. It is also higher a year later 8 of 9 times and up 14.1% on average.
Source: Ryan Detrick
She moves in mysterious WAVES
Historical patterns indicate that when inflation arrives, it on occasion does so in waves. In particular, this was the case during the most recent extended period of elevated inflation in the US, in the 1970’s. In this instance, headline CPI hit a peak of 6.2% in December 1969, then dipped below 3% by mid-1972, only to surge above 12% to 12.3% in December 1974. Two years later, headline CPI had slowed to below 5% but again a renewed spike followed, with an even higher peak of 14.8% reached in March 1980.
Source: Credit Agricole
Buyback alert
GS alerts to the postive on massive VWAP buying, JPM however sees dimming outlook for buybacks:
1. Corporate sentiment around buybacks has already turned less positive given limited earnings growth, much richer valuation, and IRA buyback tax.
2. Despite strong buyback activity YTD (second highest on record and $882B of gross executions is 95th%ile since 2000), this relatively strong activity is less productive in reducing share count given inflated prices and valuation.
3. Gross buyback yield has fallen to 2.1% over the past year vs. pre-Covid of 2.9%. At current market cap (~$39.5T), for buyback yield to reach pre-Covid level, executions would need to increase by $200B to ~$1.1T(vs. 2022 peak activity of ~$950B vs. LTM: ~$885B). (JPM)
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