After an outstanding start to the year for Equity hedge funds, this most recent gap move higher in stocks (while rates and FX remain firmly ‘in range’) is pretty-much exactly what RBC’s Charlie McElligott warned is a “bad scenario” for equities funds.
Risk-assets to fresh highs alongside a ‘reflation impulse’ re-rack (S&P eminis through their 1 year trendline resistance as we speak, while the early scan (revisions / updates coming later of course) of new positioning data shows a remarkable jump in TY (UST 10Y fut) open interest 70k (!) as shorts re-engage SIZE, h/t RBC Futures).
Inputs:
First-and-foremost, the Trump drive-by statement on a ‘phenomenal’ tax plan to purportedly be released in the next ‘two or three weeks’ satiates the market’s primary desire for clarity and positive-messaging on the tax cuts and how they are going to be funded to keep them ‘rev neutral’ (BAT? VAT? Cash flow taxation? No interest deduction? A replacement of ‘amortization of cap goods’ by instead a deduction of ‘capital purchases’? Have House and Senate somehow shockingly ‘aligned’ after being so ‘apart’ on this topic?) As a reminder, the tax cuts are by far-and-wide the largest driver of the S&P target upgrades that daisy-chained Street-wide in December.
This post was published at Zero Hedge on Feb 10, 2017.
Recent Comments