Bear market rally or not? Is anyone else completely fucking lost??
Understand that most of the YTD rally has been driven by under positioning / short squeeze / CTA bidding / vol compression; what I see right now is:
- People were initially pricing in a recession early in 2023 vs pushing out those forecasts to late 2023 or onwards
- Massive divergence between equities/equity multiples and what bonds/yields are pricing
- Longest a bear market rally has stayed above 200dma? (not a market historian but certainly feels like that)
- Heading into a fed meeting mid March where its unlikely they'll hike >25bps despite hot economic data because they've already committed to slowing pace of hikes
- Sure doesn't seem like inflation is under control: wage-price spiral in the cards with insanely low unemployment, commodities finding a bottom, consumer still pretty strong / consumer credit being back above pre-Covid trend
What am I missing? Is it literally just the 0DTE stuff people seem to be whining about? Don't really understand the quant shit as well as I should given how much of an influence it seems to have on markets...
The sad reality of today's market. The only shit that matters is the above. All your earnings models and fundamental work are useless
Think that fundamental work will matter again (and technically it still does if you have longer holding periods) once a new market regime is established
Feels like a significant shift from low growth / low inflation / low rates to what we have now so yeah this stuff will dominate for a minute but unless I'm wrong I don't think this is anything new? I.e. macro becomes the most important thing during big regime changes but only for a short time
There's some famous quote about the market bottoming when every HF manager is focused on macro
Also don't think its fair to say earnings models and fundamental work were what mattered the whole time the bubble was inflating, valuations were ludicrous in tech for the longest time and still havent fully corrected
Huh? It has been a very 'stockpicker' year. Market is adjusting to more cashflow based. Value names with strong cashflow has shown strength in price.
But yeah it's a great year for macro quant. It's guaranteed that if you don't know how options impact markets, you're gonna be fucked, and fucked and fucked.
Can you go into a bit more detail on how the options has such a large effect on more regular markets?
Funny when its well established that timing the mkt is very difficult if not impossible
Also: "Why is my timing the mkt not successful? Especially when everyone, their grandma, and their pizza delivery driver all have the same thesis?"
Bought some index puts today (small size), will see what powell says tomorrow but will probably get fucked given what you said above re: timing...
I think the market overpriced some left tail risk and is exhibiting some reversion to slightly unfavorable economic expectations. My issue is that this regime we are in is reliant too much on lagging indicators. Forward expectations are basically non-existent so everything is primarily reactionary. The fundamental guys are having trouble due to the CTAs and more “fast-money” movers. I see thematic and macro outperforming for this year.
dumb question, but what are CTA's?
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