We are really living through full stock market cycles in the matter of weeks. MS Equity Strategy – that were rather early in calling out that the initial “bounce” was more than just a bear market rally – are now saying that the risk of a correction has increased. If it is a “correction” and not a “resumption” of the bear trend – the rally was a…[Read more]

Sanford Bernstein looks at possible explanations for the market recovery.

1. Investors could be looking to the end of lockdown as we pass the point of maximum uncertainty about the economic impact. The sobering point is that in none of these scenarios can the market be said to be cheap in any sense (see table below).

2. Another possible…[Read more]

Reasons we are up according to Goldman Sachs:

1, liquidity stress has eased, lower cross asset volatility, especially rates vol

2, more constructive shape of the recovery, less left tails, long dated skew is down, div futures we have been outlining over past weeks have all rebounded big

3, sentiment has improved from extremely depressed levels,…[Read more]

Goldman Sachs: If the month of April were to end on 4/15, US equities on the GS Prime book would have seen the largest monthly $ net selling since Aug ’16 (-1.6 SDs vs. the past five years). All 11 US sectors have been net sold MTD, led by Cyclical sectors

Hatzius: “On a year-on-year basis, our forecast for US growth shows -11% in Q2, -8% in Q3, and -5% in Q4, which clearly qualifies as U-shaped. On a quarter-on-quarter annualized basis, however, this same forecast shows -34% in Q2, +19% in Q3, and +12% in Q4, which looks rather V-shaped. Thus, our forecast is one in which the economy recovers only…[Read more]

Marko Kolanovic: Investor positioning remains light. Hedge funds are positioned defensively with an equity beta in the ~10th %tile, and systematic investors’ exposure is near the bottom of its historical range. CTAs would be covering shorts / buying long if the S&P 500 reaches ~2900. Volatility-targeting funds will start adding equities as v…[Read more]