The bearish narrative is primarily focused on a slower than expected ramp in economic activity coming out of lockdown and the magnitude of the bounce since the March 23 low. The bearish narrative makes complete sense, but ultimately outnumbered and outweighed by: 1) massive policy
Today and tomorrow is the peak 48 hour period for CQ1 earnings season in the US and Europe. Notwithstanding the rally-to-date, the last 24 hours have been encouraging. Overnight results from GOOGL covered the sharp decline in core search advertising revenues during March, but management
The S&P 500 is bumping into overhead technical resistance at the ~2900 level and still burning off short-term overbought conditions. Meanwhile, equity positioning, sentiment and room for multiple expansion remain highly supportive. Sentiment feels like it improved as the narrative recently shifting from infection/mortality rates
We’ve all heard that a coronavirus vaccine will take at least 18-months to develop. But there are also reports of vaccine trials with much shorter timelines like 3-4 months. Reports of an 18-month timeline refer to a ‘pathogen-specific’ vaccine where a piece of virus is
Next week marks the peak of CQ1 earnings season but SPX EPS estimates are now fairly well established with top-down 2020 EPS at ~$137 and 2021 at ~$167. Most investors are dismissing 2020 and looking into 2021. This normally happens around the middle of the
Light equity positioning and nearly-unanimous bearish sentiment keep the balance of risks skewed to the upside. This morning’s release of the American Association of Individual Investor (AAII) sentiment poll showed 50% of the respondents identified themselves as bearish over the next 6 months.
Tomorrow brings weekly jobless claims with consensus looking for 4.25MM vs 5.245MM last week. There’s no debate that the global economy is in free-fall, but tomorrow’s April flash PMI data (Japan, UK, Eurozone and US) might give us a sense for the bottom and maybe
From an equity perspective the most important piece of data is still weekly jobless claims report announced Thursday mornings. Thus far, the peak in claims was March 27 with 6.867MM. Last week, claims came in at 5.2MM and consensus is looking for 4.5MM this Thursday.
As discussed on Friday, the main driver behind the rally to date is extremely light equity positioning among all investor categories. Individuals, long-only managers, hedge funds and systematic strategies (CTAs, Vol Targeting etc) are all underweight equities. The initial ~17% bounce off the 3/23 lows
Equity positioning remains extremely favorable and should keep the balance of risk skewed to the upside. As I alluded to in the Snapshot section above, there are early signs of systematic funds returning to equities. These strategies (mainly CTAs and Volatility Targeting ) are heavily
