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TME Weekend: "Not a rosy picture"

Not a rosy picture

The 10YY has now been elevated to current levels for the longest period of time since before the GFC. In addition, the move upward was pretty violent and there is rising fears that the recent spike back up toward highs has further upside. Jefferies took a look at similar instances of big upward swings in the 10YY and subsequent SPX performance. What they found doesn’t paint a rosy picture. On average, 1-3M performance is flat to negative, but when you take out the ‘big’ swings during ZIRP, it gets even worse. Average 3mo SPX performance is -2% and average 12mo performance is just 4%.

Source: Jefferies

 

Elevated HF turnover levels

HF turnover stays high as volumes relative to exposures have risen to their highest level globally since late March.  

Source: JPM PI

 

Re-grossing

In terms of hedge fund global flow, this week saw a few days of re-grossing after many weeks of de-grossing.

Source: JPM PI

 

Sentiment set-back

Apparently we are no longer stretched....The GS "Sentiment Indicator" measures stock positioning across retail, institutional, and foreign investors versus the past 12 months. Readings below -1.0 or above +1.0 indicate extreme positions that are significant in predicting future returns.

Source: Goldman

 

-25% or -60%? What's next when unemployment stops falling?

3 scenarios. From ‘no landing’ to ‘crash landing’: timing of decisive policy reaction is key to outcome.

Source: Macrobond

 

Source: Macrobond

 

Source: Macrobond

 

Despite an 80% beat rate...

Despite an 80% beat rate, heading into the close of earnings, expectations for 2023 and 2024 are little changed as the market focuses on Demand, which has been milder than margins this season. Price action confirms that the strong beats seen this quarter (magnitude +7% on earnings) were within buyside expectations or less than hoped, with the average releaser down -53bps relative to the market vs. ~+12bps historically.  (Morgan Stanley)

Beat rates yes. Earnings reactions no.

With 85% of the index having now reported results, the 78% beat rate is back well above trend and at its highest level in nearly 2Y. That said, earnings reactions remain negative on average no matter the surprise-type, a dynamic we haven’t seen since 2Q17.

Source: Jefferies

 

Source: Jefferies

 

BRK cash mountain actually "smaller"

"Headlines report on BRK's cash mountain, $147.4 billion up from $128.6 billion at yearend. For perspective, at 14.2% of total firm assets (now over $1 trillion for the first time), cash as a proportion of assets is in line with the past 25 years and below 2016-2021 levels." (Bloomstran)

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