Equities

US Equities Rose Again This Week, Helped By A Stabilization Of Regional Financials

Despite the possible reversal of recent bearish positioning, we continue to see a challenged path ahead for US equities, with little upside to earnings and valuations

S&P 500 Total Returns vs iBOXX USD HY Liquid Bonds | Source: Refinitiv

Equities

US Equities Did Relatively Well This Week, Despite A Selloff Ahead Of Potential Weekend Surprises

Defensives and highly liquid stocks outperformed this week, as the downside focus was obviously on weak balance sheets and rates sensitive sectors like regional financials

Equity Indices 3M ATM Implied Volatilities | Sources: phipost.com, Refinitiv data

Equities

US Equities Had A Difficult Week As Powell And Regional Financials Provide One-Two Punch

The speed at which things got out of hand with SVB is the worry for US regional banks, with short-term implied volatility on financials getting a little panicky while the broader market stays relatively calm

XLF 1-Week / 3-Month Implied Volatility Spread | Source: Refinitiv

Equities

Broad Rebound For US Equities This Week, Though S&P 500 Ends February Down 2.6%

The story of equities so far this year has been one of resilient revenue, declining margins and expanding valuations on the back of more positive than expected growth; as such, the greatest risk to the market remains that of recession and growth downgrades

US Equity Risk Premium | Sources: phipost.com, Refinitiv & FactSet data

Equities

US Valuations Have Come Down Somewhat With Higher Rates, But The Equity Risk Premium Remains Low

In the absence of pressure on risk premia, the story of equities this month has been entirely driven by a shift in the economic narrative, with investors wondering how high rates will need to go for the Fed to achieve a landing

FTSE Global 100 Index | Sources: phipost.com, Refinitiv data

Equities

US Equities Fairly Resilient Through Recent Rates Repricing, But Hard To See A Lot Of Upside Given Current Valuations

Despite the tremendous rebound in Chinese equities since October, the valuation levels remain reasonable compared to US and European large-cap equivalents

Forward P/E Multiples in US, Chinese, European Equities | Source: FactSet

Equities

Derisking Ahead Of Much-Awaited CPI Data After US Equities Start The Year Up 10%

Expectations for FY2023 S&P 500 EPS continue to come down: they were around $250 last year and the median estimate now stands at $227 according to S&P Capital IQ (the consensus still sees around 2.5% EPS growth YoY)

FactSet USA & World Total Returns Indices YTD Performance | Source: FactSet

Equities

Strong NFP Surprise Takes Equities For A Slide Into The Weekend; S&P 500 Still Up 8% YTD

Global equities are off to a spectacular start this year, underpinned by a broadly positive growth outlook and fueled by short covering; estimates of speculative net exposure remain low, meaning that the rally could go on for a while

S&P 1500 Price Performance By Sector YTD | Sources: phipost.com, Refinitiv data

Equities

Market Participants Are Taking Advantage Of The Current Equities Rally, Lower Volatility To Buy Downside Protection

Earnings have been unspectacular so far, essentially in line with lowered market expectations; excluding energy, results are down about 5% YoY, with a focus on margin compression

US Sectors Outperformance During 1980's Period Of Disinflation | Source: Jefferies

Equities

Equities Weaken As 4Q22 Earnings Start Rolling In, With 17% Of The S&P 500 Reporting In The Week Ahead

It's hard to see much upside from here for US stocks over the next 12 months, with the S&P 500 forward P/E around the 80th historical percentile and downward earnings revisions just beginning in earnest

China Mainland + HK 1-Month Gross Total Returns (USD) | Sources: phipost.com, FactSet data

Equities

Global Equities Surf On The Current Goldilocks Vibe And Kick Off 2023 With Solid Gains

Although S&P 500 EPS estimates for CY2023 have fallen almost 5% over the past 3 months, they still project an EPS growth of nearly 5% vs CY2022; Goldman sees EPS growth of 0% this year and Jefferies expects -6.5%

STOXX and S&P 500 1-Month Implied Volatility Smiles | Sources: ϕpost, Refinitiv data

Equities

Weakness Across Global Equities, As Hawkish Central Banks And Soft Data Add Up To A Challenging Environment

The year 2023 is setting up as a tale of two halves in the US: the first one should be dominated by earnings revisions and bring in a possible new bottom for the cycle, while the second half should be a positive recovery trade

Forward P/E For US, Chinese, European Equity Markets | Source: FactSet

Equities

As Expected, US Equities Down 3.6% For The Week Ahead Of Critical Macro Events Next Week

China's mainland and Hong Kong equity markets continued to rebound on the back of looser local COVID restrictions, with a full national reopening expected around April next year

Hong Kong's Market Cap Is Back Above Japan's (USD Trillion) | Sources: ϕpost, FactSet data

Equities

Nice Further Gains For Global Equities This Week, Driven By Hopes Of Looser Fed Policy And Chinese Reopening

At current levels US equities are pricing in a soft landing, and with the VIX sub 20 and US CTAs now 80% net long (from net short a month ago), it's hard not to be cautious into year end

S&P 500 Price Performance (%) By Sector Over The Past Month | Source: S&P Capital IQ Pro

Equities

Mostly Poor Performance Across US Equities This Week, With Higher Rates And Falling 2023 EPS Forecasts Weighing

Looking at 2023 sell-side outlooks, it's worth noting that most firms don't see much upside for US equities from here: Credit Suisse's end of 2023 S&P 500 index forecast is at 4,050, Goldman Sachs at 4,000 and Jefferies at 4,200

Year-To-Date USD Total Returns For Top & Bottom Performing Countries | Sources: ϕpost, FactSet data

Equities

Tremendous Rise In US Equities As CPI Print Brings Hopes Of A Soft Landing, Shorter Hiking Cycle

Chinese equities continued their rebound this week, largely driven by a fear of missing out, as most observers point out that the most likely time for a change of covid policies will be after the two sessions in March 2023

S&P 500 Current 12M Drawdowns By Sector | Sources: ϕpost, Refinitiv data

Equities

US Equities Dropped This Week Along With Implied Volatility, An Illustration Of A Nervous Market With Low Convictions, Light Positioning

Optimism about China's reopening drove speculative enthusiasm through the Mainland and HK markets this week, with the most depressed sectors (internet stocks) leading the way

China Mainland + HK Gross Total Returns (USD) By Sector | Sources: ϕpost, FactSet data

Equities

Solid Bounce In US Equities Despite Mediocre Earnings, As Fed Scores Own Goal Hinting At Policy Slowdown

With a little over half of S&P 500 companies having now reported their 3Q22 earnings, the results have been broadly disappointing, tracking well below weak expectations (2.2% EPS growth realized vs 3% expected)

S&P 500 Implied Volatility Short-Term Skew At Very Low Level | Sources: ϕpost, Refinitiv data

Equities

Broad Rise In Global Equities This Week, With China + HK Still The Most Visible Laggards

As the equity risk premium continues to look too skinny against the rise of real yields, Goldman strategists see the S&P 500 trough around 3,150 in a hard-landing scenario (down 16% from where we stand at pixel time)

World Market Cap Now At US$89 Trillion, Down From $120tn Last Year | Sources: ϕpost, FactSet data

Equities

Light Directional Positioning, Combined With A Lot Of Hedging, Drive Unintuitive Moves In US Equities This Week

The broad selloff today came with a drop in implied volatility, indicating that portfolio managers took advantage of lower prices to cash in on their hedges

Nasdaq 100 Index and Nasdaq Implied Volatility Index | Source: Refinitiv

Equities

Choppy Week For US Equities, Ending Modestly Up After Big Gapping Moves On Tuesday And Friday

3Q22 earnings season is upon us, with Pepsi kicking things off on Wednesday; estimates have come down over the past month, but probably not enough to reflect a US recession 1Y forward

S&P 500 Index Prices Over The Past Week | Source: Refinitiv

Equities

Choppy Trade For US Equities This Week; S&P 500 Price Index Ends September Down 9.4% For The Month, Down 5.3% For The Quarter

We still expect to see lower cycle lows: valuation multiples are too high relative to real yields and corporate margins expectations will need to compress further

S&P 100 Price Performance In September | Source: S&P Capital IQ Pro

Equities

No Surprises In The Extended US Equities Drawdown, With Rates Volatility Driving Further Losses

Although we still expect lower lows for this cycle, from a compression in multiples and corporate margins, we should see a bounce this week, as multiple technical indicators point to short-term capitulation

S&P 500 12-Month Price Range By Sector | Sources: ϕpost, Refinitiv data

Equities

Ugly Week For Equities, With All Major Global Indices Falling: S&P 500 Down 4.8%, Nasdaq Composite Down 5.5%

As mentioned last week, we continue to expect equities to make new cycle lows: with US core inflation still rising, the rates complex is repricing the path of Fed Funds higher, which will inevitably lead valuation multiples lower

USD Total Returns Year To Date | Sources: ϕpost, FactSet data

Equities

Broad Rebound In Global Equities From Oversold Levels, Helped By Lower Rates Volatility

Considering the current level of the US equity risk premium, and the stretched implied volatility skew on 1-month S&P 500 options, we doubt this technical move higher will prove durable

US Equity Risk Premium | Source: Credit Suisse

Equities

Tough Weak For Global Equities, As The Perspective Of Higher Rates And Weaker Growth Starts Getting Repriced

As Peter Oppenheimer (Goldman Sachs) has pointed out recently, the split between growth and value stocks is no longer important: what matters more in the current context is identifying reasonably priced defensive positions (as opposed to cyclicals or long-duration unprofitable growth)

DEF vs SPY ETFs: Rebased Prices Since June 2022 | Source: Refinitiv

Equities

Friday Meltdown For US Equities As Fed Not Amused By Recent Loosening In Financial Conditions

Despite a little jolt today, volatility remains low considering the difficult background for the remainder of the year: if the labor market and the economy stay strong, the flight path will need to be higher rates, wider credit spreads, lower equity valuations

Growth Stocks Underperform Value When Real Yields Rise | Source: Credit Suisse

Equities

US Equities Fly Higher As 2Q22 Earnings Showed Surprisingly Robust Margins, Corporates Mostly Able To Pass On Higher Costs

The path of least resistance is up for now, with strong technicals and low summer liquidity; but at some point, perhaps after Jackson Hole, the Fed will have to ensure that financial conditions aren't getting too loose to bring down inflation

S&P 1500 Drawdowns From 12M Highs By Sector | Sources: ϕpost, Refinitiv data

Equities

Mixed Day For Equities On Friday, A Fairly Positive Development Considering The Rates Backdrop

The second quarter earnings season is coming to an end, with 86% of S&P 500 companies having already reported, and the numbers are better than expected (though not spectacular from a historical perspective): about 60% of S&P 500 stocks beat on both revenue and earnings

S&P 500 1-Month Implied Volatility Smile | Sources: ϕpost, Refinitiv data

Equities

US Equities Up 4.2% This Week, Energy Stocks Up Another 10%, With The Brent Crude Spot Price Closing Around $110/bbl

The current bear market rally is likely one of the most unloved: beat-up stocks rising double digits with very low participation, as hedge funds and real money managers had to reduce gross exposures markedly to provide cash for client withdrawals that have yet to materialize

Top- & Bottom-Performing Countries Over The Past Year | Sources: ϕpost, FactSet data