Triple Witching

Per Bloomberg, we’ve got ~$5.5trn of options expiring—the biggest in market history, driven by a record $870 bn notional in single stock options. December 2023 ($4.9 trn), was the prior record high. So, today, traders have to roll over their existing positions or start new ones.

Seligman’s Wick is doing the unthinkable for some-- trimming his Nvidia stake after questioning the co’s earnings growth prospects, per BBG. Today we’re flagging this on Wall Streat Beats as one way the market doesn’t stay propped up.

The S&P closed at the 31st all-time high this year. We’re talking 31 all-time highs out of 115 trading days or 1 ATH every 4 trading days. 2024 is the best start to any election year on record. BTIG noes that it’s been 333 days since the S&P recorded a decline of -2% or greater, which is the longest stretch since February 2018. Per McElligott’s chart, a lot of folks under captured the last melt up, so will they have FOMO YOLO MOMO and chase markets higher? Or will folks do some math and feel discipline? Well, it may come down to companies. US Corporates are the largest net purchaser of equities every year and especially in 2024. Those in the S&P made $237 bn worth of repurchases in Q1, for the largest quarterly executions on record. Over the last 5 yrs, they repurchased $4.8 Trn worth of shares (~$1 Trillion per year over 5 years) and $7.6 Trillion in the past 10 years. They’re not reinvesting the cash. They’re propping up what brings them value per math on share count, folks!

MS says HFs became sellers of Consumer Discretionary in June, and roughly 80% of the Discretionary selling can be explained by short additions. They’re also getting out of hotels, restaurants, leisure, etc. Some selling in Household Durables too….which makes sense since we seem to have enough stuff and prefer services. Specialty Retail was the one area where HFs got longer and unwound shorts.

US mortgage rates fell to their lowest level since early April, per Bloomberg. But folks still need people to move/sell in order to make their purchase, so we’ll see if the housing market can start moving again.

Credit rating agencies mis-rated $100bn bonds financing defaulted properties, per the FT.

PMIs were not so hot, friends. EZ flash PMI for June fell to a 3-mo low, per Reuters. In the UK, the PMI reflected a slowdown in UK services, per Bloomberg. Even over in Japan-- services PMI moved to a contraction for the 1st time since Aug-2022, per Reuters.

Canada is preparing tariffs on Chinese EVs too, ganging up with the US and the EZ. The issue comes down to overproduction of key goods…are they (China) doing it to dominate supply chains and undercut global companies? Are they using dirty energy and forcing poor labor standards to compete against us? The value of Chinese EVs imported by Canada was $2.2bn CAD in 2023, versus $100mm in 2022...but that includes Tesla cars coming from Shanghai, so I doubt Musk will be in favor of this.

Written by CIO | Nadine Terman @SolsteinCapital Edited by Investment Principal | Nick Hart @SolsteinCapital