Stocks have fallen for three straight days since Fed Chairman Jerome Powell’s terse and tough speech at Jackson Hole. Bank of America’s equity derivatives team says equities still underestimate policy risk.
“The Fed fighting inflation through financial conditions means rallies in risk assets force and allow them to rise more aggressively (as the Fed put has given way to a short Fed call) . And as investors return from Labor Day, we think there’s still plenty of room for equity. [volatility] to catch up with stress levels in other asset classes,” they say.
But perhaps the most interesting element of his latest analysis is about China. The world’s No. 2 economy, after all, has been loosening monetary policy and perhaps loosening the regulatory reins a bit.
As well as being in a different cycle, there’s also the issue that emerging market stocks just aren’t loved right now. The ratio of emerging market equities to US equities is now near all-time lows.
What would make emerging markets explode? “We hear that investors are waiting for a cap in US rates and the US dollar to buy seriously,” says the BofA team. That’s not quite yet, but it could come in the fourth quarter. Long emerging markets could be the trade of 2023, they say.
Not surprisingly, equity derivatives strategists have a few option plays in mind, to start positioning themselves for change with less risk of being too early or just plain wrong. One involves a call in iShares MSCI Emerging Markets ETF EEM,
outperforming the S&P 500 SPX,
and another is a call spread collar involving the China Internet ETF KWEB,
The markets
After a 5% drop for the S&P 500 over the past three trading days, US ES00 stock futures,
NQ00,
they were mixed. The 10-year Treasury yield TMUBMUSD10Y,
rose to 3.15%. GC00 gold,
and CL.1 oil,
futures declined.
The buzz
Cleveland Fed President Loretta Mester delivers a speech on the economy at 8 a.m.
hp hpq Computer Manufacturer,
reported lower-than-expected revenue in its fiscal third quarter, and Calvin Klein parent PVH PVH
cut its earnings outlook and said it will cut jobs. Maker of Jack Daniel’s Brown-Forman BF.B,
You must report the results before opening. Bed bath and beyond BBBY,
Shares tumbled in premarket trading, ahead of the meme stock trading update.
BYD 1211,
stocks plunged in Hong Kong after Warren Buffett’s Berkshire Hathaway BRK.B,
he sold a stake for $46 million.
Russia began what it said was a temporary cutoff of gas supplies to Europe through the Nord Stream 1 pipeline.
The best of the web
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The mounting evidence that COVID-19 leaves people sicker.
The best tickers
These are the most active stock tickers on MarketWatch as of 6am ET.
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Heart |
security name |
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BBBY, |
Bed bath and beyond |
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TSLA, |
Tesla |
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gme, |
gamestop |
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AMC, |
AMC Entertainment |
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BOW, |
AMC Entertainment Preferred Stock |
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TWTR, |
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AAPL, |
Apple |
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LITTLE BOY, |
child |
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AMZN, |
amazon.com |
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BBY, |
Best Buy |
The graphic
sprott
Here’s a look at how mutual funds can change the demand for the underlying asset. The spot price of uranium has been on an upward trend since the launch of the Sprott Physical Uranium Trust UUT,
That said, the gains also coincide with the global push for deglobalization and a severe shortage of other forms of energy due to sanctions imposed on Russia for its invasion of Ukraine.
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Barbecuegate, the controversy that surrounds France.
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