| February 22, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Fear Is Creeping Back Into The Stock Market
Gunjan Banerji - WSJ
There's been a shift in the stock market lately.
After racing higher to kick off 2023, U.S. stocks suffered their worst session of the year yesterday. And some investors who jumped back into the market are taking a more cautious stanceâhedging their stock bets or re-evaluating portfolios, said Matthew Tym, head of equity derivatives trading at Cantor Fitzgerald.
/jlne.ws/3YSUUb9
Don't fear the ODTE reaper
Louis Ashworth - Financial Times
You have so much to worry about. Super bacteria, ecological collapse, bin day, Liverpool's current form, whatever "deinfluencing" is.
So it's nice to get some reassurance from Bank of America that you definitely don't need to worry about zero-day-to-expiry (0DTE) options, which have been the coolest thing in US equity derivatives [ed: contradiction?] for a few years now.
/jlne.ws/3IMSuoY
The surge in volatility means investors are acting like it's 2022 again as markets fear bad inflation news, DataTrek says
Matthew Fox - Business Insider
The sharp decline came as bond yields surged amid concern about persistently high inflation and the likelihood that the Federal Reserve would hike interest rates more than initially expected.
"What a difference a day makes, because today the VIX closed at 22.9, its highest level since the first trading day of 2023," DataTrek Research co-founder Nicholas Colas said in a Wednesday note. The VIX continued its surge higher on Wednesday, jumping over 1% to 23.18.
/jlne.ws/3Ewv193
Hedge Funds Primed to Gain From Stock-Picking Boost, Goldman Sachs Says
Abhishek Vishnoi - Bloomberg
Hedge funds are positioned to benefit from an increasingly favorable environment for stock-pickers in the US, according to Goldman Sachs Group Inc.
One measure of funds' use of leverage to take positions is close to record highs, suggesting they are "well-timed to take advantage" of improving conditions for stock picking, strategists including Ben Snider wrote in a note dated Feb. 21, after analyzing the holdings of 758 hedge funds with $2.3 trillion of gross equity positions at the start of this year. "An increasingly micro-driven market bodes well for hedge fund returns."
/jlne.ws/3ZcFZIv
Crypto Stocks Are Getting Shorted Big Time. How That Could Go Really Wrong.
Barron's
Betting against crypto stocks would seem like a sure thing. But it's turned into a nightmare for traders over the last month - another sign of how tough it can be to make money in crypto.
With Bitcoin down sharply and the crypto industry reeling, investors have piled into bets against crypto-related stocks. Companies including Coinbase Global (ticker: COIN), Silvergate Capital (SI), MicroStrategy (MSTR), and Marathon Digital (MARA) are now some of the most heavily shorted stocks on the market.
/jlne.ws/3ZbShRA
Wall Street's elite investors are privately warning that the stock market is headed for another scary plunge
Linette Lopez - Business Insider
The good news is undeniable. I get that. A milder winter in Europe has kept energy prices low. China is reopening from the economic standstill that was "zero COVID." And the US economy is stunning everyone with its resilience.
"The economy is BOOMING! now," one legendary hedge-fund manager told me via email, citing the 517,000 jobs created in the US in January. "That is not what a recession looks like."
/jlne.ws/3kjjXF9
Wall Street's Top Analysts Don't Think the Bear Market Is Over
Phil Rosen - Markets Insider
The stock market has climbed to start the new year despite hot economic data suggesting more interest rate hikes from the Federal Reserve are on the way, and the disconnect has caused some of Wall Street's top analysts to warn that investors need to brace for more pain to come.
Morgan Stanley's top strategist Mike Wilson wrote in a note this week that stocks have soared too high too fast, and those highs will ultimately prove unsustainable.
/jlne.ws/3XSu9Cb
Global shares, U.S. Treasury yields, fall ahead of Fed minutes
Chibuike Oguh - Reuters
Global equities and U.S. Treasury yields were lower on Wednesday as investors awaited the release of the Federal Reserve's meeting minutes that are expected to shed light on the trajectory of interest rates.
The Fed minutes from the Jan.31 to Feb.1 meeting are set to be published at 2 pm ET (1900 GMT), and will give traders some detail into the debate over how much further interest rates may need to be hiked to curb inflation.
/jlne.ws/3IJBZdc
BofA claps back at JPMorgan's 'Volmageddon 2.0' warning: 'reality is more nuanced'
Joseph Adinolfi - MarketWatch
Last week, MarketWatch rolled out a pair of stories about potential risks stemming from the explosion in trading of zero-day to expiry --- or "0DTE" --- equity options. We noted that JPMorgan Chase & Co. strategist Marko Kolanovic fears 0DTEs could lead to "Volmageddon 2.0" --- a reference to Feb. 5, 2018, when the implosion of several short-volatility products triggered a massive selloff in U.S. stocks in a dynamic that has been described as some as "the tail wagging the dog."
/jlne.ws/3IM3WB2
| | | | | | Exchanges | | | Euronext Is Said to Explore Takeover of H&F-Backed Allfunds
Jan-Henrik Foerster, Manuel Baigorri and Dinesh Nair - Bloomberg
Euronext NV has made an indicative takeover offer to buy fund distribution platform Allfunds Group Plc for EUR5.5 billion ($5.9 billion) in cash and stock.
The bid from Euronext values the company at EUR8.75 per share, Allfunds said in a statement Wednesday, after Bloomberg News reported it was exploring a bid.
/jlne.ws/41gQrka
| | | | | | Strategy | | | This Bear Market (Probably) Isn't Over Yet
James Mackintosh - WSJ
Is yet another bear-market rally coming to an ignominious end, or has the stock market entered a new and more forgiving paradigm?
Investors grappling with the confusing signals from the economy and markets can be forgiven for struggling to explain the switch in behavior by stocks this year.
/jlne.ws/3xIE2YE
Hedgers Beware: The VIX's Muted Volatility In 2022 May Warrant A Strategy Change
Michele Ormont - Benzinga
Dispersion trading is returning to the markets amidst a timid response to market uncertainty from Cboe's Volatility Index⢠(INDEXCBOE: VIX).
The trading strategy is based on the underlying difference between the implied volatility of S&P 500 Index options and the "actual" volatility observed. In 2022, market conditions were ideal for dispersion trading. Speaking of 2022, Scott Phillips of Lavaca Capital says: "The lack of a meaningful increase in implied volatility this year, despite a large market sell-off, is quite unusual."
/jlne.ws/3Ewy3tX
| | | | | | Miscellaneous | | | JPMorgan limits traders' use of ChatGPT amid regulatory concerns about financial information, report says
Phil Rosen - Business Insider
The Telegraph first reported that ChatGPT's use was curbed among traders due to concerns about regulatory action related to sensitive financial information being shared with the chatbot.
ChatGPT is currently restricted across the company as part of normal restrictions to third-party software, sources told Bloomberg.
/jlne.ws/3ZdhfQt
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