Technical Analysis: The unwinding of the Yen carry trade has become the dominant story in recent weeks. There were rumblings of this becoming an issue back in April, but now we have seen a major acceleration in volatility due to this positioning unwind. The VIX tested an intraday high of 65 on Monday morning, a level it has only exceeded twice before – the 2020 COVID crash and the 2008 financial crisis. It has since mean-reverted back below the 30 level while the major benchmarks are still holding above their rising 200-day moving averages. We tested the forward performance of equities when the VIX moves above the 30 level over the past 25 years. Looking out 90 days from the event, there were 48 instances where the S&P 500 moved higher and 21 instances when the market moved lower. The average move to the upside was +10.30% while the average downside move was -5.42%, resulting in an expected value of +5.51% from this signal. The market environment remains tricky in the near-term, but it is from these periods of volatility that major opportunities arise. Reach out to Aazan Habib, CFA, CMT or your Paradigm sales representative to get a copy of our latest reports and to discuss where we see long/short opportunities.
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Estimates of probabilities derived from options on the S&P 500 suggest that participants are assigning less than 6.5-percent odds to a 20-percent decline in the index over the next year, marking the lowest level recorded since June 2007.
Perhaps a bit alarmist, but an old-fashioned selloff in equity markets might be the most significant macro risk on the horizon. Estimates of probabilities derived from options on the S&P 500 suggest that participants are assigning less than 6.5-percent odds to a 20-percent decline in the index over the next year, marking the lowest level recorded since June 2007. This seems unsustainably low - particularly after the index added more than $16 trillion in value over the last two years - and important for currency markets, given the high correlations that have emerged between global exchange rates and US stock prices since the pandemic. *Subscribe to our daily analysis here: https://lnkd.in/g5sD4ZJ9
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Perhaps a bit alarmist, but an old-fashioned selloff in equity markets might be the most significant macro risk on the horizon. Estimates of probabilities derived from options on the S&P 500 suggest that participants are assigning less than 6.5-percent odds to a 20-percent decline in the index over the next year, marking the lowest level recorded since June 2007. This seems unsustainably low - particularly after the index added more than $16 trillion in value over the last two years - and important for currency markets, given the high correlations that have emerged between global exchange rates and US stock prices since the pandemic. *Subscribe to our daily analysis here: https://lnkd.in/g5sD4ZJ9
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GIFT Nifty: Trading of Nifty 50 index futures on the GIFT Nifty indicates that the Nifty could fall 32 points at the opening bell. Global markets: Overseas, Asian stocks are trading lower as investors await cues from various central bank decisions over the week, starting with the Bank of Japan. As per reports, the Bank of Japan is today likely to end the longest streak of negative interest rates. Australias central bank will also announce its rates policy on Tuesday and is widely expected to hold rates. Wall Street’s main indexes closed higher on Monday, as tech companies gained, while investors awaited monetary policy guidance from the Federal Reserve. Investors will be watching insights on the U.S. central bank’s future rate trajectory. Domestic markets: Back home, the domestic equity benchmarks clawed their way back from early losses to close slightly higher on Monday. The barometer index, the S&P BSE Sensex gained 104.99 points or 0.14% to 72,748.42. The Nifty 50 index rose 32.35 or 0.15% to 22,055.70. Foreign portfolio investors (FPIs) sold shares worth Rs 2,051.09 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 2,260.88 crore in the Indian equity market on 18 March, provisional data showed. Powered by Capital Market – Live News Disclaimer: No Business Standard Journalist was involved in creation of this content First Published: <!-- -->Mar 19 2024 | 8:57 AM<!-- --> <!-- -->IST Source link
GIFT Nifty indicates subdued opening
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HBZ Market Summary: What Happened Last Week ? - Global equity markets delivered robust performance during the past trading week with only India and Japan showing distinct weakness. - US Treasury yields trended moderately lower for longer maturities following a number of successful large auctions. - The yield for the 10-year note hovered 4.5%. Credit spreads tightened moderately for high-yield corporate and EM issuers and generally remain low. - The trade-weighted US dollar was little changed at relatively rich levels. - Gold meanwhile recovered from its recent weakness and bounced back to the USD 2’360/oz level. - Crude (Brent) rose close to USD 84/bbl. on rate cut and growth optimism. Asset Classes: What do we like ? Currencies & commodities - Relative monetary policy, high carry favors the USD over other major currencies for the time being. - Expectations of rate cuts from G10 central banks are supportive for gold. Equities: - With well over 90% of S&P 500 companies having published their Q1 results, annual earnings growth stands at 7.1%, well ahead of the expected 3.8%. - Close to 80% of the companies beat expectations and almost 65% reported higher earnings compared to a year ago. - Earnings growth was largely driven by IT and communications whereas energy and materials detracted from it. - Within the US market, we continued to prefer technology sectors as well as quality stocks. Fixed Income: - Major European central banks are on track to cut policy rates ahead of the Fed – European rates to outperform. - Subordinated bonds of well-rated European financials offer a strong investment case, attractive yields.
