TME Weekend: QT in vogue, reversed iceberg and the fattest trade

What you missed this weekend

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1. The latest data from Morgan Stanley, Goldman and Deutsche Bank on who has aggressively been selling this past week - and how CTAs made a massive unexpected reversal.

2. The Magnificent 7 trading at very stretched multiples and hedge funds still being max long and how this could end badly.

Unsupportive policy: QT still in play

Quantitative tightening may have taken a backseat in recent months, but is still very much in vogue.

Source: BofA Quant

Worth 3 25bp hikes

Since the September FOMC, the MS FCI has tightened by ~80bps in fed funds equivalent - a little more than three 25bp hikes worth since then.

Source: Morgan Stanley

A bearish take from Morgan Stanley's industrial team

1. Large capital equipment decisions are being deferred.

2. Global manufacturing momentum (IP growth) is already recessionary.

3. Leading companies (eg. ASML, Tesla) are highlighting the effects of higher rates on their businesses.

4. Destocking is still at an intermediate phase.

5. Order softness is no longer confined to one region (eg. China) or end-market (eg. construction).

6. Capital Goods companies have been over-earning in areas like Electrification and Distribution – this is where the future margin risks lie.

7. Buffett Indicator suggests ~15% sector downside to post GFC valuation levels, >50% to pre-GFC (1995 – 2010).

Titanic market analogy

But not the way the bears want the analogy....The only reference here is that this market looks like 1997, the year Titanic was released. "...not to make too much of one overlay, but in the search for periods that look and feel similar to today ... enter the 1997 analog" (Tony P, GS)

Source: Tony P, GS

Positioning: A little below neutral

Deutsche Bank reports a "slight" decrease in positioning to "a little" below average. Deutsche: "Both discretionary investor positioning (z score -0.14, 37th percentile) and systematic strategies positioning (z score -0.11, 36th percentile) declined slightly and are a little below neutral"

Source: Deutsche Bank

Fat chance!

When your longs are up 30% and the shorts down 30% YTD...actually happened if you played the obesity theme.

Source: Goldman

Final five

1. Five straight weeks......Europe has now closed down each of the last 5 weeks, which has only happened twice in the last 10Y.

2. Ouzo bonds.......US 10 year bonds yield 4.90%. Greek 10 years yield 4.37%. How bizarre.

3. Billion dollar hack......OKTA ($12bn marke cap) whose DNA is to provide secure login credentials for corporates got breached with hacked login credentials. Stock down (only) 12%.

4. Never stop.......66% is the average amount of weight patients regained in the first year after they stopped using Ozempic.

5. Who?..........Who will buy $1,784,000,000,000 of newly-issued Treasuries next year....?

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