00:00Max, we've erased our gains for the year now in the major indices here, at least the NASDAQ 100, the
00:04S&P and so on.
00:06Why should it be consoling to us that this might be a rotation trade?
00:10It certainly looks like a sell-off and it doesn't really matter who's benefiting.
00:15Yeah, to be fair though, I mean, I find it amazing when we talk about sell-off.
00:18This morning I checked my inbox and my inbox is full of, do you think the sell-off is going
00:22to continue?
00:23And I got 24 hours back and we've almost been hitting an all-time high.
00:27Again, another fresh all-time high.
00:28So we're sort of wavering, you know, 1% or 2% from the all-time high and then it
00:32lasts really in the last two, two and a half months.
00:35So it's not like there's an awful lot of having been happening.
00:38I think it's mostly a rotation.
00:40Yes, number one.
00:42So it's mostly really about people being along the wrong stuff.
00:45That's number one.
00:46Number two is when we look at those rotations, particularly the worst sort of drawdowns from high beta names, from
00:53long momentum names, which is what we've done this week.
00:55We really looked at what do the 5% of the worst daily returns of those big unwinds mean when
01:01we see those big rotations.
01:03Is that a signal for poor forward returns overall from a market perspective, for equities, for EM rates, for EM
01:09debt, for credit spreads, whether it's IG or high yield, for FX?
01:13And the finding is that's not really any signal at all, not even concurrently, but also not going forward.
01:19When we look at a week forward, we're not getting any informational value out of that sort of rotation.
01:24So what it really is, at least empirically, which counts to me the most, is actually it's just people being
01:31along the wrong stuff.
01:32They rotate around.
01:33Once that's done, then, you know, it's probably over and it doesn't really have an awful lot of impact on
01:38the overall market.
01:39The third thing, very quickly, is on sentiment and positioning, clearly what we've had in the last three weeks with
01:44that rotation and with really some stocks getting heavily beaten up, some sectors getting heavily beaten up.
01:50What we see in our framework is that overall sentiment and positioning has gone a lot lighter now.
Comments