1. QT Dead…Risk On Again?
Risk asset markets are racing ahead. Is the bull back? We argue that not much has changed, except that QT (quantitative tightening) is effectively ‘dead’
- Three events have changed investors’ mood: US Quarterly Refunding (QRA), Fed FOMC Statement and H4.1 Release, and a downbeat October ISM Print
- Most important by far is the QFA. This effectively ‘added’ a net US$80 billion of liquidity to US markets. It confirm ‘fact’ that QT effectively dead
- Risk still remain in our view. These events underscore a flat market in risk assets. Equity bull market still requires positive Central Bank liquidity injections and a stable bond market
2. Korean Government Ready to Temporarily Suspend Short-Selling: A Move to Gain More Votes?
On 3 November, numerous local media outlets reported that the Korean government is likely to temporarily suspend short selling in the Korean stock market for about six months.
- On 3 November, numerous local media outlets reported that the Korean government is likely to temporarily suspend short selling in the Korean stock market.
- According to a high level ruling party official, the Korean government plans to announce temporary ban on short selling stocks no later than on 15 November for about six months.
- There is a major legislative election in Korea in April 2024. If there is a temporary ban on short selling stocks, this could be viewed negatively by many foreign investors.
3. 5 Important Factors Impacting Shorting Korean Stocks Rules + Shorting the Dutch East India Company
The Korean regulators are actively considering a plan to limit the short selling repayment period for foreign and institutional investors to 90 days (same as the individual retail investors).
- In this insight, we discuss the five important factors impacting potential regulations changes of shorting stocks in Korea.
- The Korean regulators are actively considering a plan to limit the short selling repayment period for foreign and institutional investors to 90 days (same as the individual retail investors).
- More than 400 years ago in 1609, a Dutch businessman called Issac Le Maire started to short shares in the Dutch East India Company.
4. Credit Watch: The Worst Is Behind Us in the SLOOS, But…
The quarterly SLOOS survey from the Fed was released a bit more than an hour ago and the results resemble the quarterly credit surveys from Japan…
- The quarterly SLOOS survey from the Fed was released a bit more than an hour ago and the results resemble the quarterly credit surveys from Japan and Europe released ahead of the US ditto.
- There is a sequential improvement in demand, while fewer banks tighten standards compared to Q3.
- So, is it good news or did the survey rather confirm the credit contraction?
5. Portfolio Watch: November Bear Market Rally?
As I am sure you are aware we have been awaiting the exact market move we have seen this week: The long end of the UST curve catching a breather fueling an inevitable risk-on rally.
- Hello Everybody and welcome back for our weekly Portfolio Watch! As I am sure you are aware we have been awaiting the exact market move we have seen this week: The long end of the UST curve catching a breather fueling an inevitable risk-on rally.
- That fear is essentially why we have abstained from going full-on short beta these past weeks.
- A decision we are content with this week.
6. Steno Signals #72 – When a Recession Meets a Melt-Up in Equities and Bonds
The BoJ no longer has a firm guidance towards higher 10yr bond yields, the Fed accepted higher long bond yields as an excuse to pause and economic data has been abysmal.
- Happy Sunday and welcome to our flagship editorial! What a week.
- The BoJ no longer has a firm guidance towards higher 10yr bond yields, the Fed accepted higher long bond yields as an excuse to pause and economic data has been abysmal.
- That cocktail has so far allowed the everything rally to thrive in a way we haven’t seen in quarters, but the feedback loop introduced by the big central banks may limit the scope of the bear market rally.
7. Thailand: Government Shows Early Signs of Impotence
Bangkok’s haphazard planning of the digital wallet stimulus is a symptom of broader policy paralysis given the unwieldy coalition government.
- The cyclical outlook for Thailand remains mixed despite the formation of the government. Signs of policy impotence are emerging, limiting the administration’s ability to respond.
- The messy implementation of Pheu Thai’s flagship digital wallet is but one sign of policy paralysis. The pro-Thaksin party is stuck in myopic populism to prop up its support.
- The unwieldy composition of the coalition means that hopes for economic and political reform are unlikely to be met. Economic upsides from political stability are thus limited.
8. EIA Watch: Oil demand up, Fuel demand down..
Welcome to our weekly EIA Watch where we use our sophisticated models to filter noise from actual trends in the EIA demand data for Energy…
- Welcome to our weekly EIA Watch where we use our sophisticated models to filter noise from actual trends in the EIA demand data for Energy products.
- Since a week ago, Oil has rebounded in the non-adjusted implied demand while transportation fuel demand weakness is seen across Gasoline and especially Diesel.
- We continue to find the Gasoline demand out of whack with reality, while the Oil demand looks to be closer to the actual demand.
9. Will Euro Shrink to Parity to the Dollar on Diverging Macro Economic Conditions?
Euro-Dollar parity murmurs are creeping back into the market. Economic divergence will force euro to weaken but others believe that pessimism is already priced in.
- Since December 2002, the euro has traded above parity to the USD with the only exception being the last quarter of 2022.
- Following central banks rate decisions to pause hikes across both sides of the Atlantic, volatility in the Euro/USD pair is near 12-month lows.
- Low volatility equates to lower option premiums. Periods of low volatility offer best opportunity for going long options.
10. Macro Regime Indicator: Heavy Long in Cyclical FX
We anticipate consistent QT in both USDs and EURs in the forthcoming month. On a 3-month time frame, and given the assumed conditions, our model suggests a substantial allocation towards gold.
- With the turn of October, it’s time for our monthly evaluation of both the present and coming month’s macroeconomic conditions, in which we weigh risks against rewards.
- In order to do so, we employ both our Macro Regime Indicator framework and the interactive Structural Asset Allocation Model.
- In combination, these tools provide an empirically rooted portfolio allocation, given the identified macro conditions and drivers in financial markets.
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