Tech cools, retail rages and some madness
Hot stuff not so hot
The AI proxy, NYFANG, has been the hottest stuff around in 2023. It closed below the 21 day moving average today, by a margin not seen since late April. 50 day is still way lower...
Source: Refinitiv
Massive tech inflows
The inverse to early 2023. Long tech here is not unique...
Source: BofA
Retail - back with a vengeance
Retail have been very active during the squeeze. Goldman's Marshall and team show the exposion of the high retail sentiment basket. They also point that a big part of the flow has come from options chasing: "... put-call skew in single stock have shown unusually large call option buying pressure."
Source: GS
Not a typo
Soc Gen's Edwards shows that net interest payments have collapsed, despite the surge in rates. He writes: "Something very strange has happened, and it helps explain the recession’s tardiness."
Source: Soc Gen
Source: Soc Gen
The madness chart of the day
Impressive chart via Edwards explaining why the recession refuses to kick in (yet). He writes: "We have concluded that a sizeable proportion of huge, fixed rate borrowings during 2020/21 still survives on company balance sheets in variable rate deposits. Companies have effectively played the yield curve in reverse and become net beneficiaries of higher rates, adding 5% to profits over the last year instead of deducting 10%+ from profits as usual . Hence it’s not just ‘Greedflation’ that has boosted US profit margins and delayed the recession. Interest rates simply aren’t working as they once did. It is indeed a mad, mad world."
Source: Soc Gen
Main street vs Wall street
Not everybody is exuberant...
Source: GS
Everybody up
The only way is up...? Great summary showing the collective upgrade since January.
Source: Bloomberg/Authers
Never forget: lower liquidity
"....we have watched and waited for an impact from the clear liquidity drain taking place.....as rates remain high and higher for longer…impact of commercial real estate exposure starts to bite….and deposit pricing competition persists…..it is hard to believe the convenient compartmentalisation of regional banking crisis as a thing of the past can persist. I can’t point to what will catalyse the next liquidity shock…but I do worry that when it comes….it will be in a market with materially lower liquidity than what we’ve witnessed in recent months/years." (Bobby Molavi, GS)
The last hike
"We expect a hike next week to 5.25-5.5% to be the last of the cycle. But on a probability-weighted basis, our Fed views remain more hawkish than market pricing. This reflects both our lower probability of recession and our expectations that the threshold for rate cuts will be fairly high and that cuts will be gradual"
Source: Goldman
Source: Goldman
EM showing the way
At least when it comes to monetary policy...Hartnett writes: "1st time since Feb’21 in EM that rate hikes no longer exceeding rate cuts."
Source: BofA
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