GS has a nice chart out showing that this year, we’re seeing more fundamental factors in the driver’s seat, versus macro factors like interest rates which dominated stock drivers a couple of years ago.
BBG has a great piece out today on the short-vol bets that are ridiculous in size right now. From ETFs selling calls (so if the market were to move up sharply, they would have to deliver the underlying) to institutions riding the dispersion plays (so if the volatility in their underlying long book is less than the overall market vol they’re shorting…watch out), there is a ridiculous sum of money betting that vol remains low. Over $60bn worth, which is significantly greater than the level we experienced in 2018 with Volmageddon…which was not fun. Investors get excited scalping some nickels on these trades until the overall level of people playing the game gets to large that they don’t understand the bets they are making relative to the bets that others are making.
Remember February? Well, investors are worried again that a hotter-than-expected US inflation print tomorrow could echo the day when stocks slid -1.4%.
The top tech names haven’t been experiencing differentiated returns this year, so you can’t just blindly invest in the basket and expect similar performance. In fact, investors are actually putting money to work across a variety of stocks YTD, and not just US tech megacaps.
ASML is threatening the Dutch gov to leave for France if they can’t hire foreign workers needed to sustain its chipmaking-machine lead. Macron’s pro-biz reforms and nice subsidies are looking a little rosier than the pressure on expat rules in the Netherlands. But could 23k people really trade in their Poffertjes for croissants? Doubt it. But they make a fair point that countries have to enable their companies to remain competitive.
China was up a ton. Hang Seng +1.43%, Shanghai +0.74%, Shenzhen +2.27%, ChiNext +4.60%. Unlike Japan, which was soft last night. Nikkei down -2.19% and Topix down -2.20%. They increased growth figures, which drove investors to bet that there will be a BOJ policy pivot. Swaps traders are pricing in about a 64% probability of a rate hike next week. JGB yields and the yen moved higher. Interestingly, the BOJ didn’t buy ETFs despite the Topix drop.