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...

 
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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. 

 

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.

 

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