Very interesting dynamic to end the week. Out of the last 12 weeks, the S&P has deliver 10 negative weekly returns and only 2 positive, included last week. The market narrative has been centered on the expectation that the fed will be less hawkish on its July #FOMC meeting as it appears that the economy may be in a recession and inflation may have peaked. As a result, there was an equity rally on Friday on the basis that “bad news is good news”. If we look at the chart below, however, it would appear that yesterdays move was simply short covering from algorithmic trading, as the most shorted names in the S&P500 rebounded significantly more than the index. And even though the premises of the narrative may be true, we still don’t have confirmation regarding the recession and it’s severity or wether inflation has peaked and we still don’t know what the Fed reaction will be to that information.
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Source: Zerohedge, Bloomberg
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