Roaring Cat Returns! Does Wall Street have a fear of going short before the release of heavyweight inflation data?
zwm532018
发表于 2024-5-14 11:40:21
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The Dow Jones Industrial Average fell on Monday this week, regretfully ending its longest consecutive rise this year (eight consecutive gains). However, for Wall Street, the overnight market is clearly not pessimistic: the NASDAQ Composite Index, which is concentrated in technology stocks, still rose 0.3%, and the army of US retail investors, which was once a meme fever, has also shown signs of making a comeback.
And perhaps more importantly, many industry insiders are not afraid of the upcoming US April CPI data, but rather fear missing out on the next wave of market trends. Some traders seem to be having a lot of ideas about rubbing their hands and making a big move at the moment
Goldman Sachs strategist stated in a latest report that the US stock market and bonds will face upward risks this week as traders continue to build long positions in various assets before key inflation data is released.
Scott Rubner, Managing Director and Tactical Expert of Global Markets at Goldman Sachs, wrote in a report to clients on Monday, "Based on last week's inflow of funds, I am starting to see some real FOMO (fear of going short) emotions emerging."
The S&P 500 index overall hovered around 5220 points on Monday, having risen for three consecutive weeks, thanks to market expectations that the Federal Reserve will eventually cut interest rates this year and the resilience demonstrated by corporate Q1 earnings reports. According to industry compiled data, 79% of S&P 500 companies have exceeded expectations in their first quarter earnings per share so far.
Keith Gil, who sparked a frenzy in MEME stocks under the name "Roaring Kitty" in 2021, posted again on the X platform on Monday after nearly three years. Gaming Station's stock price surged by over 70% in a single day, further sparking speculation about the possible return of the US retail investor army.
"Roaring Cat has returned, and this morning the message board went crazy. It's time to start a new storyline," Rubner said. The sharp fluctuations in the game station's stock price were fueled by call options quietly collected by traders in early May.
Rubner stated that the Commodity Trading Advisor (CTA) fund, which trades futures contracts using systematic strategies, has been increasing its long positions in US stocks. The total position of systematic stocks, including CTA, volatility control, and risk parity funds, has seen a resurgence of increased positions after reducing long positions during the sharp decline in early April.
Rubner pointed out that CTA's demand for stocks and fixed income assets may clearly emerge in the coming week, and most of Goldman Sachs models have already shown a "green sweep" signal - meaning that even if the market declines, investors will continue to flock to the US stock and bond markets.
"I think there is an upward trend in the US 60/40 investment portfolio this week," Rubner said.
He did not specify the possible upward or downward magnitude of the S&P 500 index, but he pointed out that the amount of funds flowing into US stocks in the next week may be between $7.6 billion and $13.2 billion.
In addition, due to over 90% of S&P 500 companies having already announced their first quarter results and the market being in a "peak window" for company buybacks, Rubner predicts that there will be approximately $5.5 billion in demand every day until mid June.
In the bond market, as US bond prices rebounded slightly overnight, yields on US bonds of all maturities generally further declined. Among them, the 2-year US Treasury yield fell 0.2 basis points to 4.874%, the 5-year US Treasury yield fell 1.1 basis points to 4.511%, the 10-year US Treasury yield fell 1.3 basis points to 4.491%, and the 30-year US Treasury yield fell 1 basis point to 4.632%.
Many industry insiders have pointed out that Wednesday's US April CPI report may provide key guidance on the policy outlook for the Federal Reserve's June interest rate meeting, when Federal Reserve officials will update their quarterly economic and interest rate forecasts. The current good news is that many investment banks, including Morgan Stanley and Barclays, believe that Wednesday's US CPI may be significantly "lower than expected" due to downward signals from housing rental inflation.
Of course, it is currently unknown whether these optimistic predictions will come true. "From now until the end of the year, the importance of CPI data to the Federal Reserve cannot be overemphasized. This data will either confirm that the last mile of inflation will be very difficult, or mark a return to the trend of slowing inflation in the second half of last year," said Ian Lyngen, head of US interest rate strategy at BMO Capital Markets in New York
Andrew Tyler, the head of US market intelligence at JPMorgan Chase, said that based on current estimates of fair cross option prices, the options market is betting that after Wednesday's CPI report is released, the S&P 500 index is likely to fluctuate by about 1% in any direction, and the impact of this inflation indicator on US stocks is likely to be comparable to Nvidia's financial report later this month.
Peter Tchir, Macro Strategy Director at Academy Securities Inc., pointed out that if the market resumes pricing the Federal Reserve's interest rate cuts at least twice this year, the 10-year Treasury yield may drop to around 4.30%.
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