Since then, futures traders have priced in a 45% probability that cuts could begin as soon as the Fed’s March meeting. See: Fed’s Waller says economy may be slowing enough to tame inflation. “I don’t know how long that might be - three months, four months, five months - that we feel confident that inflation is really going down and on its way, you could then start lowering the policy rate just because inflation is lower,” Waller said. Christopher Waller, considered a hawk when it comes to interest-rate policy, surprised investors by saying cuts could begin as soon as this spring, assuming inflation continues to wane. Rate cut hopes got another boost Tuesday when Fed Gov. Rate cuts stoke optimism, but risks remain “It is all the same trade,” said Danny Kirsch, head of options at Piper Sandler, during a phone call with MarketWatch on Tuesday. It traded at 4.664% on Wednesday, its lowest level since June. Has fallen by nearly 20 basis points since the start of Tuesday’s session, FactSet data show. Treasury bonds also rallied in what bond-market experts describe as a “bull steepening” pattern led by short-dated notes like the 2-year Treasury. The ETF is up more than 3% in November as of midday Wednesday, according to FactSet.Ĭommodities Corner: Gold rallies toward ‘golden cross’ after defying bearish signal ‘All the same trade’Īmong the more defensive trades, the SPDR Gold Shares ETFĪ popular vehicle for betting on gold prices, rose 1.3% to $189.26 a share on Tuesday as gold prices surged toward six-month highs following the latest batch of dovish Fed rhetoric. equity strategist at eToro, in an email to MarketWatch. “Options traders have been playing catch up all month,” said Callie Cox, a U.S. The Cboe equity put-call ratio has fallen from around 1.20 just a couple of weeks ago to 0.79 on Wednesday.Īnd a team of analysts at Goldman Sachs Group said there is room for the options’ bullish “skew” to become even more extreme. Garrett DeSimone, head of quantitative research at OptionMetrics, described these bets as “basically wagers on a large Nvidia price swing.”ĭemand for calls linked to the S&P 500 has also increased. Open interest in call options that would pay off if Nvidia shares surged 24% or more has surged, as has demand for bearish put options that would pay off if Nvidia falls 17% or more from Tuesday’s close of $407.80. Traders are also using bullish equity options to chase the rally, strategists said, while bets on a large swing in Nvidia Corp. This helped boost shares of Coinbase Global Inc.Ī large ARK holding, which rose more than 7% on Tuesday. Have climbed north of $38,000 for the first time since the spring of 2022, FactSet data showed. Seen as a proxy for speculative technology stocks, rose 2.8% on Tuesday, and continued to climb on Wednesday despite weakness in the “Magnificent Seven” megacap technology names. Surged on Tuesday and Wednesday, while the Ark Innovation ETF What exactly are traders going “all in” on? “FOMO is back, baby! Traders have decided that even though it is still earning nearly 5%, cash is trash compared with quick profits in a variety of risk assets,” Sosnick said in comments emailed to MarketWatch on Wednesday. Steve Sosnick, chief strategist at Interactive Brokers, told MarketWatch that Wall Street appears to be succumbing to another bout of “FOMO,” or the fear of missing out. “As someone who has managed money professionally, there are huge incentives to go all-in.” “Don’t underestimate performance-chasing,” said Mohannad Aama, the chief investment officer and a senior portfolio manager at Beam Capital Management, in a phone interview with MarketWatch. To be sure, this dynamic isn’t exactly new, having briefly emerged during the summer of 2022, and during other brief bouts of optimism stoked by hopes for a Fed pivot.īut after a year that has seen many active managers lag the S&P 500, this latest round of year-end profit-chasing is seeing a more speculative twist. The ‘everything rally’, with a ‘FOMO’ twist Some have described it as the latest leg of an “everything rally” fueled by a broad macro bet on Federal Reserve interest-rate cuts beginning early next year.
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