YOUR QUIVER | December 14, 2022
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Deflating Balloon
That’s what yesterday’s market felt like here in the US. The S&P failed to stay above its 200 DMA after hitting it in the early trading session. (E-Minis jumped more than 3% on the soft CPI print yesterday, and then derivatives desks saw unwinding into the rally). The magic number seems to be 4100 as a top. Investors seem to be short-term oriented in the brief buying episodes, with institutions and larger money managers still on the sidelines (or taking advantage of strength will exposure-cutting). Retail remains a seller, US composite beta positioning is at YTD highs, short interest is down meaningfully, and systematic and corporate buying is slowing. Hence, no sustained bounce yesterday. Perhaps it’s the Powell scare—no one wants to bet too big either way before the main event today. Will he coo like a dove? Or fly with the hawks? Or speak out of both sides of his mouth so that everyone can find something to get excited about, including his peers? Our bet is on the latter, as he threads the needle with a hot labor market and signs of cooling inflation.
Friendly Skies
Delta increased FY 22 and 23 guidance and mentioned strong 1Q23 bookings. Consumers (and business travelers) are still wanting to get the heck out of dodge and go somewhere, now that the pandemic is in its nth year…have you also lost track of how many years now? Our team believes that demand for experiences and services will remain strong next year, even with a weaker economic backdrop. On a somewhat humorous note, Musk (I mean “Twitter”) suspended the account of the kid who tracks his jet’s movement. Anyone else suspect that the kid’s phone is ringing off the hook from lawyers?
Overnight Action
Asian markets increased due to the softer CPI print: Korean KOSPI +1.1%, Hang Seng +0.6%, and Nikkei +0.7%. Eurozone equities were down: Stoxx 600 -0.6% (weak consumer discretionary, travel and tech), FTSE -0.3%. The BOE is expected to raise interest rates tomorrow by 50 bps with inflation still near 40-year highs.
Expected Vol
Once we get through the triple witching event this week, we expect vol to decline as investors/traders check out those friendly skies. Yet, as we have seen in other years, it pays to have your seat in the seat, as you can often take advantage of others who are not.
Inverted Thinking
The UST 10yr-3mo curve remains inverted by over 80 bps; it’s the 15th straight trading day that the curve was inverted by >=50 bps. Recessions typically follow within a few quarters. Today we expect a higher dot plot and a 50 bps hike. Everyone is watching signs for the terminal rate: 4.875% (expected) or 5-5.2%?
Negative Influence
8 guys who used social media to pump and dump were charged with a $114mm fraud scheme. Two are founders of Atlas Trading which is on Discord.
No Soup for You
FTX founder is denied bail and is looking at up to 115 years behind bars for his actions.
Let 'Er Rip
Seems like ripping off the Band-Aid is the best way to describe China’s exit from zero Covid policies. With hospitals filled ahead of the Lunar New Year Holiday in Jan (and canned yellow peaches in short supply—still don’t get that one), perhaps there was immense concern about public unrest that outweighed the normal managed planning and execution of health policies.
Longbow's Inflation-Beating Gifts Under $50
I thought we were done…but you wanted more, so we are delivering! Today we introduce the Marchway Floating Waterproof Dry Bag in different sizes (5L to 40L), all under $50. Somewhat a symbolic choice today. You want to head out on a warm vacation, but you also want the security of knowing that your stuff is safe and retrievable. Kind of like heading into Powell’s remarks today. You’re hoping equity markets improve, but you’re cautious and aren’t going full throttle into the event. Fun, but risk-managed.
