| August 31, 2022 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Bank of America Says Market Is Underestimating Fed Risk Even After Stock Rout
Elena Popina - Bloomberg
A late-summer lull is nowhere to be seen in the stock market, with traders recalibrating their expectations after a blunt warning from the Federal Reserve chief in Jackson Hole. Most likely, they have a long ways to go.
So say derivatives strategists at Bank of America Corp., who point to a disparity in price-swing expectations in equities and other asset classes. The S&P 500's rebound in the two months through mid-August sent the Cboe Volatility Index, or VIX, into a dormant zone next to similar gauges in the rate or currency markets. The rude awakening that Jerome Powell's speech has been to US shares means that investors need to catch up in pricing policy risk.
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Stock Market Outlook: Volatility to Persist Amid 'Noisy' Data, UBS Says
Jennifer Sor - Markets Insider
Stocks will stay volatile as investors continue to be inundated with a mixed bag of economic data and try to figure out where inflation is really coming from, said UBS investment chief Mark Haefele.
"We've got lots of noisy data like CPI, core, and headline, we've got the jobs data," he told Bloomberg TV.
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Bets Against Meme Stocks Like GameStop, AMC May Get Easier With New ETF Filings
Katherine Greifeld - Bloomberg
Skeptics of the meme-craze that's re-ignited corners of the stock market may soon have a fresh way to bet against it.
Ten single-stock exchange-traded funds would bet against companies like GameStop Corp. and AMC Entertainment Holdings, according to a Monday filing with US regulators. The funds, which will be advised by Toroso Investments LLC, would add to a growing roster of single-security ETFs, which use derivatives to offer leveraged or inverse exposure.
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Short Bets on Hong Kong Stock Market to An All-Time High
John Cheng - Bloomberg
Short-selling activity on Hong Kong stocks has hit an all-time high, creating the potential for a large jump in share prices if investors rush to cover their positions.
The turnover in short positions as a proportion of the Hong Kong stock market's total swelled to a record of 23% on Tuesday, according to calculations by Bloomberg based on exchange data. Tech names were among most active, with Tencent Holdings Ltd.'s short turnover nearly doubling to 31%, while Meituan's rose to 28%.
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Oil prices mark their longest monthly losing streak in more than 2 years
Myra P. Saefong - MarketWatch
Oil futures headed lower for a third month in a row in August, on track to tally their longest streak of monthly losses in more than two years.
"The reality of slowing global economic growth setting in has been met with renewed COVID lockdowns in China, continued strength in Russian exports, supply returning from Libya, the potential for Iran to bring more oil to the market amid a renewed JCPOA [ran nuclear deal] agreement, and the strongest U.S. dollar in 20 years," said Troy Vincent, senior market analyst at DTN.
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Bursts of bullish exuberance are common during bear markets --- and it's all too easy to get sucked in
Mark Hulbert - MarketWatch
Just because it feels like a bull market doesn't mean it is a bull market. That's important to point out because of how bullish investors became in the wake of the U.S. market's two-month rally off of its June low. Many declared that a new bull market had begun.
It's possible they're right. But know that bursts of investor enthusiasm occur frequently during bear markets. This tendency to prematurely declare the bear market to be over is poorly understood, since many believe investors' mood gradually declines during a bear market in a more or less straight line. If the investor consensus were to follow that path, the average investor would be most bullish at the beginning of the bear market and most bearish at its end.
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| | | | | | Strategy | | | An Ominous Month Looms for Battered Nasdaq Bulls: Tech Watch
Ryan Vlastelica - Bloomberg
The second half of August has been bruising for technology stocks, but those hoping for a respite from the declines shouldn't relax just yet: September is just around the corner.
The month historically has been the worst of the year for returns, suggesting another reason for caution as investors also grapple with inflation and rising interest rates from the Federal Reserve. Over the last decade, the Nasdaq 100 Index has declined by an average of 0.6% during September, the only month of the year with a negative average. The tech-heavy index fell 5.7% in the Septembers of both 2020 and 2021.
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Here's what might be the trade of 2023. How to dabble in it now.
Steve Goldstein - MarketWatch
Stocks have dropped for three days running since Fed Chair Jerome Powell's terse and tough talk at Jackson Hole. Bank of America's equity derivatives team say equities are still underpricing policy risk.
"The Fed fighting inflation through financial conditions means risk asset rallies both force and allow them to hike more aggressively (as the Fed put has given way to a short Fed call). And as investors return from Labor Day, we believe there is still plenty of room for equity [volatility] to catch up with levels of stress in other asset classes," they say.
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