End of Week Podcast: Breakdown of rates and equities
What is the skew for equities and what are the probabilites for a recession?
Hey everyone,
I wanted to take the time to further explain the dynamics in the equity report I published for you. I recorded a screen share podcast explaining the report and sharing some macro charts. For context, here are the articles I referenced:
Equity Report: Link
Equities are going to Melt UP published in January 2024: Link
Interest Rate Strategy and Report: Link
Interest Rate Primer: Link
Synthesis of all the educational articles: Link
The learning journey never ends
How do you reconcile what the market is telling you regarding the attribution of returns per sector and taking those as positive signals that growth and expansion continue (e.g. tech outperforming utilities), versus the short positioning of the market and how you are discounting those signals vs. the attribution signals? It's obviously a nuanced thought process but let's assume that the hedge funds that are net short and who have been bleeding capital (and continue to do so) all have sophisticated economic models and analysts which are indicating strong nominal/real growth with expanding liquidity. The question then is why do they persist in holding a net short position on the market? Is it due to their own constraints, their long book leverage, or other factors? If the market thru the attribution analysis is saying one thing, similar logic would say that these HFs are also signaling something to the market so there's clearly a deeper nuance to that thought process.