So Many Bear Stories To Revisit
Shall we revisit some old bear stories?
Sometimes they come back. And many of them actually fundamentally never really went away - it was just that Miss Market decided to ignore them. Let's have a look at some of the "old" bear stories that could resurface again. First, those unrealized losses. In Q4 2023, unrealized losses on investment securities for banks hit $478 billion. Meanwhile, the Bank Term Funding Program has officially expired.
Source: Apollo
Sometimes they come back
Second bear story is the BS. The Fed's balance sheet is now at its lowest level since February 2021, down $1.5 trillion from its peak in April 2022. How much more QT is needed to unwind the massive QE from March 2020 - April 2022? $3.3 trillion. Chart shows the BS vs NASDAQ, a relationship that apparently is dead...
Source: Refinitiv
It's a long way down...
....if SPX is to close some of the gap vs Fed reserves.
Source: Refinitiv
Reserves and the rate of change
Four week roc in Fed reserves vs SPX. You decide if this will start to matter.
Source: Refinitiv
VIX cares?
VIX vs Fed reserves.
Source: Refinitiv
That sentiment & positioning backdrop
Just a few of so many stretched indicators:
1. AAII Bull Bear index near the top of the range
2. Active equity manager exposure is close to the top of the historical range
Source: Barclays
Source: Barclays
This bear story never went away
Housing Affordability Index hit the lowest level on record last week.
Source: Goldman
The biggest scare story of them all
Inflation of course - the one that moves in mysterious waves. What if the move in Gold really (partly...) was about smelling inflation...?
Source: Refinitiv
That bearish alligator gap
Stocks have continued to rally YTD amid range-bound real rates.
Source: Barclays
War
The Middle East geopolitical headlines are going from bad to worse. For the first time since Oct 7th it really looks that this could morph into something much bigger.
*NETANYAHU: WE WILL HURT THOSE WHO HURT US OR PLAN TO HURT US
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