SignalPlus Macro Analysis: Interest rate cut expectations postponed, SPX continues to rise

Lila

24-03-04 19:00

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Original title: "SignalPlus Macro Analysis (20240304): Interest rate cut expectations are postponed, SPX continues to rise"

Original source: SignalPlus Chinese

Risk assets continued to rebound last week, even as another regional bank reported credit woes, plus A well-known economist has declared that the Federal Reserve will not cut interest rates in 2024 and will not be able to stop the advance of the rising train. The SPX has risen in 16 of the last 18 weeks, a run not seen since 1971, according to Deutsche Bank.

On the one-year anniversary of SVB’s collapse, New York Community Bancorp management said the bank discovered major flaws in its internal loan review process. That resulted in a 100% goodwill impairment ($2.4 billion) and a shakeup of the management team, sending its stock price plummeting on Friday. However, unlike last year's widespread panic, Wall Street seems to believe this is just an isolated case, and the weakness in the stock's net ratio (around 0.5) has largely reflected these concerns, even as NYCB shares plunged 20% on Friday. %, but the KBW Regional Bank Index only adjusted slightly (about 0.3%).

The U.S. economic recession is far away (The Atlanta Fed estimates first-quarter GDP growth of about 3%), U.S. consumers are still quite strong (Bank of America mentioned that consumer spending increased by more than 3% in February), employment/wage/inflation growth remains stable, Apollo’s chief economist Experts say the Fed will not cut interest rates in 2024 as the central bank will spend most of 2024 battling inflation and keeping yields high. Slok pointed out that U.S. growth expectations have risen sharply, the job market remains tight, core inflation remains high, and financial conditions are too loose. These factors will jointly curb easing expectations. In addition, the Federal Reserve has shifted from its verbal policy starting in the fourth quarter of 2023. This has provided sufficient impetus to asset prices.

Chairman Powell will speak on 3 He will provide a semi-annual monetary policy update to the Senate Banking Committee on March 7, when he will have the opportunity to discuss the recent rebound in U.S. inflation data and accept questions about the reasons for the dovish turn in December. In addition, the earnings season has passed, and corporate profits have been substantial, which has also been reflected in stock prices. According to Bloomberg, SPX's profit exceeding pre-season forecasts has the potential to become the largest since the fourth quarter of 2021. The growing earnings have certainly caught Wall Street off guard, with strategists rushing to upgrade their year-end targets for the SPX, with more than six forecast upgrades reported in the media in the past two weeks alone.

Similar to cryptocurrencies, retail trading activity has surged , trading volume in individual stock options continues to increase, even well above the 2021 highs, and further accelerated after positive earnings results from NVDA and META.

In China, stocks and The bond market is also finally experiencing an exciting correlation change, with the prices of the two asset classes finally starting to move in sync (lower interest rates = higher bond prices). Have Chinese assets reached a turning point? Are the People's Bank of China's easing policies finally starting to be reflected in stock prices? Hopefully the positive price action continues…

On the cryptocurrency side, record funds continue to flow in through ETFs, and the positive market sentiment seems to have spread to altcoins and memecoins, SOL (+17%), XPR (+16%), Cardano (+21%) , Polkadot (+19%), Doge (+7%) and Shiba (+131%) have all accelerated their gains over the past seven days.

In terms of options, short-term Demand for futures options surged, with open interest concentrated around the $65,000 to $75,000 level. Options exchange Deribit posted record trading volumes last week, with 24-hour trading volume exceeding $12.4 billion and open interest exceeding $27 billion. Huge interest in short-dated call options is driving up implied volatility and causing a small gamma squeeze among option sellers, with much of the exposure set to expire on March 29, so is expected to remain open for much of the month. Prices will fluctuate repeatedly (up and down), so be sure to manage your risk carefully while enjoying the gains.