tuesday, september 17th, 2024
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broadcast summary (*generated by ai, there may be errors)
Key Takeaways
- Rate cut expectations have accelerated rapidly, with markets now pricing in a high probability of two 25bp cuts
- Utilities and REITs have significantly outperformed tech stocks recently as bond proxy sectors benefit from lower rates
- Options activity and volume spikes in certain stocks (e.g. Intel) suggest potential insider trading ahead of news
- Retail sales data shows a trending deceleration, with year-over-year growth slowing from 3.6% in March to 2.1% in August
Topics
Interest Rate Expectations and Market Positioning
- Two-year Treasury yield continues to signal lower highs and lows, pricing in rate cuts
- Markets now pricing ~67% probability of 50bps in cuts, up from <15% a week ago
- Positioning long gold, bonds, foreign currencies vs USD, and bond proxy sectors has been profitable
- Risk of a "panic attack" cut if Fed delivers 50bps, or disappointment if only 25bps
Sector and Asset Class Performance
- Utilities up 16.1% QTD, outperforming tech (-2.9% for QQQ)
- REITs outperforming utilities by ~200bps
- Asian markets strong: India hit new all-time high, Indonesia and Malaysia also up
- South Africa showing textbook quad 1 economic acceleration, benefiting "value" stocks
Options Activity and Potential Manipulation
- Unusual options activity observed in Intel calls (154,000 contracts) ahead of 8% stock move
- Speaker criticizes perceived insider trading and market manipulation via options
- Explains mechanics of how large options orders can drive underlying stock price moves
Volatility and Market Dynamics
- S&P 500 risk range setup interesting with futures near top of range
- 4.3% downside risk if Fed only cuts 25bps vs expectations
- VIX closed at 17, below the "chop bucket" of 19-29
- Currently in positive dealer gamma situation, but close to flipping negative
Economic Data
- German economic sentiment at lowest level since May 2020
- India showing some positive quad 1 data (accelerating imports/exports, decelerating inflation)
- U.S. retail sales +0.1% m/m (vs -0.2% expected), but y/y growth slowing from 2.9% to 2.1%
- Food price inflation emerging in certain categories (wheat, oats, milk, tea)
Next Steps
- Monitor Fed meeting outcome and market reaction
- Consider reducing exposure to positions near top of ranges (e.g. EUR/USD, fixed income)
- Watch for potential short opportunities in German equities if lower high confirmed
