Capital_Insights

Tiger Trade Official Account, Focus on institution vision of markets.

    • Capital_Insights·09-21Capital_Insights

      Historical Data: Danger Continues in Sept, Chances are Hidden in Oct

      History has taught the market that September is typically the worst month of the year for U.S. stocks — the S&P 500 has lost an average of 1% in September since 1928.Now, September 2022 has entered the second half of the year, and the $S&P 500(.SPX)$ has also “lived up to expectations”, down more than 1% so far this month.Bank of America analyst Michael Hartnett, the most accurate predictor of the trend of U.S. stocks so far this year, said that the current pain in U.S. stocks is not over, and U.S. stocks are expected to fall until October.Earlier in the year, the analyst said this year's bear market would end in October, with a minimum of 3,000 for the $S&P 500(.SPX)$ The view is also trending in line with a recent Bank of America report on the seasonality trend of the S&P 500.Stephen Suttmeier research strategist at Bank of America technical pointed out in a recent research note that seasonal data going back to 1928 shows that trends tend to be weaker in the second half of each month than in the first half of every month except December.Suttmeier pointed out in the report: According to data, the last 10 trading days of September are often more dangerous, and investors are likely to usher in bargain-hunting opportunities in the next October.Historical data shows that September is also the only month in a 12-month period in which both the average and median returns are negative for the ten trading days at the beginning of the month and the ten trading days at the end of the month. Data also shows that the average $S&P 500(.SPX)$ lost more than 1% in the last ten trading days of September.If you look at the average $S&P 500(.SPX)$ change for each day of the month, the second half of September was even worse.A seemingly unbroken sea of red stands out in the second half of September. In addition to historical factors, Bank of America also highlighted a range of other technical factors in the report that will negatively affect U.S. stocks.The three major U.S. stock indexes fell on Tuesday as investors prepared for the upcoming Federal Reserve meeting on interest rates. BlackRock, the world's largest asset management company, said that U.S. stocks and U.S. bonds will continue to increase volatility in the future, and investors need to continue to consider reducing asset portfolio risks.Economist Nouriel Roubini, better known as “Doctor Doom” – the prophet of torment or Dr. Apocalypse’ – Having predicted the housing crash of 2007 and the subsequent financial crisis of 2008, he said a few days ago that by the end of this year, there will be a "long and ugly" recession in the U.S. and around the world. The $S&P 500(.SPX)$ will fall sharply throughout next year.Doomsday Dr. Roubini believes that the Fed cannot both bring inflation down to the target and avoid a hard landing; once the world falls into a recession, there will be no fiscal stimulus, because debt-ridden governments have run out of fiscal bullets, and there will be a situation similar to that of the 1970s stagflation.Even happened a flat, ordinary recession, the $S&P 500(.SPX)$ could fall by 30%, or 40% in the event of a true hard landing.You May Interested to Read:6 Risks in September: Expecting a Bear Rebound May be Disappointed
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      Historical Data: Danger Continues in Sept, Chances are Hidden in Oct
    • Capital_Insights·09-20Capital_Insights

      6 Risks in September: Expecting a Bear Rebound May be Disappointed

      Hawkish rate hike storm, Davis double kill, high inflation, economic recession, repurchase flameout, pension fund sales, quantitative to short... U.S. stocks are still not good, agencies warn that even if there is a small bear market rebound, and don't hold your hopes up.Below are some of the factors that still affect the development of US stocks:1. Hawkish Fed's Rate HikesThe market expects that the Fed will raise interest rates by 75 bps on Wendesday, also the expectation of raising by 100 bps has also increased.  Meanwhile, the expectation on next two interest rate meetings this year will maintain the pace of rapid interest rate hikes.Goldman Sachs’ forecast is more aggressive.The bank raised its final interest rate forecast by the end of 2022 to a range of 4%-4.25%. Specifically, the interest rate will be raised by 75 bps in September and 50 basis points in November and December.According to the latest survey of economists released by the media, most economists expect the ceiling of the federal funds rate to hit 4% by the end of 2022, to maintain this position in 2023, and to cut interest rates in early 2024.You may know that raising interest rates will cause asset prices to fall, but don't understand the process clearly. The impact of interest rate hikes is mainly divided into two parts, namely valuation and performance, also known as Davis Double Play.The first play is that the rise in interest rates will lead to the revaluation of assets, the stock price-earnings ratio will drop sharply, and the fall in asset prices often occurs in an instant (usually within a month);The second play is the decline of the macro economy and business operations. This kind of market generally has a long cycle and will be accompanied by large fluctuations in asset prices (not necessarily falling). For like the central bank's interest rate hike will first pass on the deposit and loan interest rates of commercial banks, and then affect commercial activities and consumption habits.Davis’s financial life had three phases: learn, earn, and return. The learn phase lasted into his early forties, and the earn phase stretched from his forties into his late seventies. At that point, he tackled the return phase.” Return phase = philanthropy. Davis died in 1994 leaving $900 million to personal cause.www.amazon.comOn Monday's trading, the US 30-year mortgage rate soared to 6%, the highest since November 2008. The dollar was unchanged after the news, but all asset prices fell. This shows that the rise in risk-free interest rates is gradually eroding the real demand for assets.2. High Inflation and RecessionLast week, the economic barometer $FedEx(FDX)$ issued a profit warning, the CEO even directly warned that "we are entering a global recession, and the company data is not a good omen."Global inflation is highThe Monetary Authority of Singapore said that in the medium term, global inflation is likely to remain at higher levels for longer than the low levels of benign inflation seen over the past decade.The U.S. CPI data rose more than expected in August and the number of initial jobless claims released a signal that inflation was entrenched, reinforcing the importance of accelerating interest rate hikes.Overall, high inflation and economic recession are still the main factors under pressure on US stocks. At present, the actual interest rate hike action has not been fully transmitted to the demand side, and reducing inflation not only depends on the strength of interest rate hikes, but also takes time to ferment.Bank of America's global fund manager survey for September shows fund managers believes recession is likely has increased further in September to 68%, the highest since May '20 ,and 79% of the global fund manager survey participants see slower inflation over the next 12 months than today, hinting that inflation may have peaked last month.Goldman Sachs also sharply lowered its GDP growth rate forecast for the U.S. economy this year to 0 from 4% a year ago, and lowering its economic forecast for next year to 1.1% from an earlier 1.5%.3. Companies Buyback StalledThis week, repurchase, an important engine of U.S. stocks, stalled. Beginning last Friday, 50% of S&P 500 listed companies entered a silent period for repurchase for one month. During the period of silence, Goldman's repurchase unit has turned back to its usual busy state, with the 10b-5.1 program kicking in, reducing average daily trading volume by 30-35%, or about 0.7 times the average daily volume in 2021. The slowdown is crucial and means stocks could be even worse.https://www.zerohedge.com/, BY TYLER DURDEN4. Month-end and Quarter-end Rebalancing of Pensions FundsAccording to Goldman Sachs calculations, there will be more selling pressure by the end of September - pension fund monthly and quarter-end rebalancing.Goldman Sachs models estimate that pensions could sell $18 billion in equities. From the perspective of the past three years, in terms of absolute dollar value, the $18 billion sell-off ranked 58th; in terms of net value, the $18 billion sell-off ranked 33rd, and the scale is not small.While Last two weeks of quarter could see rally due topension fundrebalancing in a similar manner to March and June. This is counter to strong seasonal tendencies and up to 84 billion dollars of debt securities maturing on Fed's balance sheet in last two weeks.5. CTA Strategy funds May Turn to ShortEarlier, UBS strategist Nicolas Le Roux pointed out that CTA will turn bearish again in September, and recently US stocks may face some selling pressure from CTA in the next two weeks.JPMorgan analyst John Schlegel said, if the economy ends up heading for a recession, U.S. stocks could even fall below their mid-June lows, at which point the CTA strategy fund could be shorting stocks further.Goldman Sachs expects to buy $7.7 billion in stocks in the coming week and reduce its holdings of $614 million in the next month as the stock market rebounds.https://www.zerohedge.com/, BY TYLER DURDEN6. Fund's Cash Balance A 20 Years HighAnother statistic to watch is that fund managers have now raised their cash balances to 6.1%, the highest level in 20 years. Rising interest rates have made cash investing equally attractive, both positive and negative.Bank of America's global fund manager survey for September shows sentiment among money managers is 'super-bearish'. ET takes a look at the key highlights of the brokerage's survey based on responses from 212 participants with $616 billion in assets under management (AUM). The findings reflect the mood among global fund managers.Fund managers' average cash balance has risen to 6.1% in September - the highest since October 2001 after the 9/11 shock, and well above the long-term average of 4.8% as recession concerns rise, the survey said.The bad news doesn't stop there, US stocks are hardly optimistic this week, and Goldman Sachs warned that anyone expecting a "bear market rebound" may be disappointed.$S&P 500(.SPX)$$SPDR S&P 500 ETF Trust(SPY)$ ,$ProShares Short QQQ(PSQ)$ ,$NASDAQ(.IXIC)$ ,$Nasdaq100 Bear 3X ETF(SQQQ)$ ,$iShares Russell 2000 ETF(IWM)$ ,$DJIA(.DJI)$ ,$Dow30 Bear 3X ETF(SDOW)$Want to join other topics as well to win more coins? [Markets Related]:Fed Meeting(21 Sept): 75bps rate hike, or 100bps?
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      6 Risks in September: Expecting a Bear Rebound May be Disappointed
    • Capital_Insights·09-08Capital_Insights

      Decline Stopped?BoA, Goldman Sachs, Big Short: Not Hit Bottom Yet

      The rebound on September 7 means that the recent decline in US stocks has stopped ?$S&P 500(.SPX)$$SPDR S&P 500 ETF Trust(SPY)$$NASDAQ(.IXIC)$ ,$Invesco QQQ Trust(QQQ)$ ,$DJIA(.DJI)$In Wall Street's views, U.S. stocks still have space to fall.Bank of America believes that U.S. stocks may fall below the lows set by the current bear market, and there are not enough buy signals yet.Goldman Sachs, which has long been optimistic about the outlook for U.S. stocks, also appears to have reversed its risk, warning investors of further volatility ahead of a true trough in the current bear market.Michael Burry, a big U.S. stock bear, tweeted: The market hasn't bottomed out yet.Bank of America strategist Stephen Suttmeier analyzed it from a technical level. He believes that the S&P 500 has tested the key point of 3900, which is the downward support of the head and shoulders top in August, and also the 61.8% retracement after the rebound from June to August. where it meets the downward test after July uptrend break.Stephen Suttmeier believes that the lows from late June to mid-July may provide the next support between 3738-3712. However, if the index falls below the 61.8% retracement level (or 3899.84) of the June-August rally, it means the index is at risk of a retracement to the year's low of 3636. He warned investors that it is not yet the time to buy U.S. stocks, and if they want to buy, they need to wait for more buy signals to appear.Goldman Sachs strategist Peter Oppenheimer analyzed the current bear market in detail in a report on Tuesday.Bear markets can be divided into three categories: structural, cyclical and event-driven, the report said. Regardless of the type of bear market, the initial transition from bear to bull tends to be strong and driven by valuation expansion. But rallies in bear markets are common, making it difficult to spot these shifts in real time.He believes that low valuations are a necessary but not sufficient condition for market recovery. Factors such as nearing the worst point of the economic cycle, peaking inflation and interest rates, and negative positions are also key factors in the real recovery of the market.Facing the current U.S. stock market, the strategist concluded that:The current market has not yet met the conditions for recovery, which suggests that the market will be further volatile before the real trough of this bear market is formed.In addition to Bank of America and Goldman Sachs warning investors, Michael Burry, a major U.S. stock market bear, also said on social media: The market has not bottomed out.Burry also pointed to the recent closure of two exchange-traded funds (ETFs) tracking special-purpose acquisition companies, one of the products of a huge bubble in recent years. The two funds traded without investors for less than two years as share prices plummeted.In another tweet Wednesday, he linked the recent collapse in cryptocurrencies, retail-favored meme stocks and special purpose acquisition company transactions (SPACs) to the market crashes of 2000 and 2008 with what he expects to be this year. .Burry was one of the first investors to spot the impending subprime mortgage storm and has a reputation as a "big bear" on Wall Street. However, in the past year, he has frequently "predicted" on social media that the U.S. stock market is about to collapse and the U.S. economy is about to collapse, but it has brought a lot of trouble to many investors who follow him.You may interested in Read:Review 2000~2001, How the Market will React to Low Unemployment
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      Decline Stopped?BoA, Goldman Sachs, Big Short: Not Hit Bottom Yet
    • Capital_Insights·09-07Capital_Insights

      USD, EUR, CNY, JPY & Equities Risks in US, Euro, CN, JP

      Total global inflows ticked up by $2.5bn month-on-month to $49.4bn in August. The US stock market led the way, with net inflows jumping from $12.6bn in July to $30.2bn.1.Dollar Surged & US Fund InflowsStronger U.S. macroeconomic data, coupled with the continued hawkishness of FED decisions,The dollar$USD Index(USDindex.FOREX)$ , which is regarded as a safe-haven asset for global investors, has surged to a 20-year high.Welcome to Read:Dollar Index Hit 20-Year High! How to invest USD with USD?The rally dragged other currencies around the world to their lowest levels in decades, including the yen, euro and pound. When the dollar is higher, that makes U.S. stock returns more attractive relative to local securities.Jerry Braakman, president and chief investment officer at First American Trust, said,he's looking for safety in Treasuries, cash and defensive stocks this year. He also said he does not plan to increase his exposure to international stocks in emerging markets, China, Japan and Europe in the short term.U.S. Fund Inflow ReturnsSource: Refinitiv LipperAccording to Refinitiv Lipper data, Investors have increased their exposure to U.S.-focused equity funds and mutual funds in four of the past six weeks, while pulling out of international equity funds for the 20th week in a row, — the most since 2019. It was the longest run since the 22-week run of outflows that ended in October 2019.There is no direct correspondence between the strength dollar and US stocks, and the two may be positively or negatively correlated.First, if the dollar continues to rise moderately and the U.S. economy is growing strongly, the momentum of economic expansion and the return of the U.S. dollar will push up both the U.S. dollar and U.S. stocks, and vice versa.Second, if the dollar rises due to safe-haven demand, the dollar will rise and US stocks will fall.Third, if the U.S. dollar rises due to interest rate hikes, it will have an impact in the short term and cause U.S. stocks to fall. In the medium term, it depends on the economic situation; if the U.S. dollar falls due to interest rate cuts, it will affect U.S. stocks in the short term and cause U.S. stocks to rise. In the medium term, it also depends on the economic data.For now, the third scenario is more in line with this market. Investors are so confident as they believe that even if a recession occurs, it is unlikely to be severe or long-term. Consumer spending remains resilient despite inflation pushing up prices. Some price pressures appear to have peaked.2. EUR & European InvestmentsThe euro traded lower, with the euro $EUR/USD(EURUSD.FOREX)$ down 13% against the dollar this year, approaching its lowest level since 2012.Challenges in Europe include soaring gas and electricity prices due to supply shortages caused by the war in Ukraine. In addition, in response to the threat of inflation and slowing economic growth, the European Central Bank raised interest rates by half a percentage point in July. The rate hike exceeded expectations and ended the EU's eight-year negative interest rate situation.Many economists expect the central bank to raise rates by another half a percentage point this week. You may interested to read:50 bps? 5 Focuses of ECB's Rate Hike on ThursdayEuropean Equity OutflowsInvestors pulled money from European ETFs in August at the fastest pace since the 2016 Brexit referendum as fears of recession mounted.The $7.7bn withdrawn from the sector was the sixth straight month of net outflows, and second only to the $8.9bn of net selling recorded in July 2016, according to data from BlackRock, reflecting the darkening sentiment across the continent.Global fund managers appear to be making similar bets, according to a recent survey by Bank of America Co., BAC.In August, 34% of respondents said they were underweight EU stocks, while 10% said they were underweight EU stocks. Overweight U.S. equities. This is a reversal from January, when 35% of respondents were overweight EU equities and 5% were underweight U.S. equities.3, CNH and China InvestmentOn the 6th September, the offshore $CNH/USD(CNHUSD.FOREX)$ against the US dollar fell below the 6.97 mark, continuing to hit a new low since August 2020. If the dollar continues to strengthen, the RMB exchange rate may break 7. The dollar has appreciated by 14.6% this year, and the renminbi has also depreciated by about 8%, but compared with other non-dollar currencies, the depreciation is the smallest.China is also facing difficulties. The world's second-largest economy is grappling with the economic fallout from multiple headwinds, including the Covid-19 pandemic, a downturn in the real estate sector, heavy regulation of tech companies and severe weather. These headwinds hurt sectors including manufacturing activity and Chinese tech stocks, with $TENCENT(00700)$$Tencent Holding Ltd.(TCEHY)$$Alibaba(BABA)$$Alibaba(09988)$ down 14% since mid-June.China's economic recovery is still weak, and the exports are one of the few important drivers that continue to drive economic growth. Europe and the United States are China's largest foreign trade partners. The economic recession in Europe and the macro changes in the United States may directly impact the demand for China's exports. If the follow-up export accelerates to fall, it may intensify the downward pressure on China's economy, and it is not ruled out that institutions will be further bullish on interest rates because of this.The China’s government data had show foreign investment into the economy grew by almost a fifth this year, and much of the investment into China actually comes from Hong Kong,Three quarters of inbound FDI was from Hong Kong last year.Source: BloombergThe data also show that three-quarters of the new investment into China has gone into services industries, rather than the crucial manufacturing sector, which the government is promoting to transition the economy toward higher-value production.4, JPY and Japan Government Bonds ShortingThe Japanese yen $JPY/USD(JPYUSD.FOREX)$ has fallen more than 19% in 2022. A renewed sell-off in U.S. Treasuries in September widened the U.S.-Japan yield gap, pushing the dollar higher and the yen to a 24-year low.The dollar rose above 143 yen against the yen for the first time since 1998 on Tuesday, with analysts saying that Bank of Japan Governor Haruhiko Kuroda will come under pressure to ignore the global trend of rising interest rates and Prime Minister Fumio Kishida's support for his stance.While the Bank of Japan is "holding its hands", Fed Chairman Powell continued to "fly hawks" at the recent Jackson Hole meeting. Markets are now speculating that the Fed will raise interest rates by 75 basis points for the third time in a row this month. In contrast, the Bank of Japan appears "out of place".Goldman Sachs analyst Kamakshya Trivedi believes the dollar-yen exchange rate could rise to 145 within three months as interest rate spreads widen as long as the Fed continues to tighten policy, considering that the Bank of Japan is likely to remain on hold.The slump in global bond markets following the Jackson Hole annual meeting has revived focus on funds that shorting Japanese government bonds.AllianceBernstein and GAMA Asset Management joined fund giants shorting or underweight Japanese government bonds, betting that the Bank of Japan will have to loosen its iron grip on yields as soaring inflation hits bonds everywhere.If comes the exchange  and debt double-killed, the Japanese financial system may usher in a crit.
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      USD, EUR, CNY, JPY & Equities Risks in US, Euro, CN, JP
    • Capital_Insights·09-06Capital_Insights

      Fed QT Doubles in Sept, How Will it Impact the Market?

      Entering September, the global market ushered in an important change: the Fed's quantitative tightening (QT) accelerated.Although it has been more than three months since the Fed started quantitative tightening in June, under the aggressive interest rate hikes, QT, which has a very low sense of existence, has not caused much trouble, and in the case of sufficient bank reserves, the impact of shrinking the balance sheet is indeed limited.However, with the progress of the reduction of the balance sheet and the doubling of the monthly scale, the market began to feel uneasy, and worries began to rise.The Fed officially started to shrink its balance sheet in June, with a monthly cap of $47.5 billion from June to August, and this rate will double in September, raising the limit to $95 billion, including $60 billion in U.S. Treasuries and 35 billion in mortgage-backed securities (MBS), or about 1% of the balance sheet.Balance Sheet Data from St. Louis Fed, chart by MishAccording to statistics, the Fed has absorbed $2.2 trillion in reserves from the banking system in the form of overnight deposits, compared with zero at the beginning of last year.For now, the reduction in reserves is not a problem, and banks still have $3.3 trillion in reserves, more than at any time before last year, but there are risks.Analysts pointed out that, on the one hand, with the acceleration of QT and the decline of bank reserves, the willingness of banks to take risks will decrease, which will affect the overall liquidity of the market.On the other hand, when reserves fall below safe levels, the Fed will have to stop rolling off its balance sheet early in order to avoid a damaging spike in repo rates.This also means that the Fed will have to adopt more aggressive interest rate hikes to make up for the lack of rolling balance sheets, and the impact on the market will be self-evident.Regarding the impact of QT, Yellen, the former chairman of the Federal Reserve and the current U.S. Treasury Secretary, once had a vivid metaphor: "It's like watching the paint dry, which is unremarkable."Solomon Tadesse, head of quantitative strategy for equities in the Americas at Societe Generale, wrote in a note last week: From a policy perspective, a lack of awareness and clear communication of the potential impact of QT could create the risk of over-tightening. On the market side, an increase in QT could trigger the next drop in the market. In other words, investors haven't realized how aggressive the QT cycle is going to be.Hedge fund giant Bridgewater is also concerned about the impact of QT. The company believes that the market will be plunged into a "liquidity hole" as a result. Bank of America equity strategist Savita Subramanian believes that QT alone could lead to a 7% drop in shares as the boost from quantitative easing reverses.Alex Lennard, investment director at Ruffer LLP, a British investment manager, said an accelerated sell-off in the Fed's holdings of U.S. Treasuries would suck liquidity out of the market, just as rising interest rates and falling stock and bond prices would increase demand for cash. Shock to stock and bond markets."Deutsche Bank strategist Tim Wessel noted in a recent report that the Fed may stop QT when bank reserves fall to $2.5 trillion. At the current rate at which money market funds are taking deposits and placing them in the Fed's reverse repo facility, that level could be reached as early as January 2023.Details of QT Path:Source: https://mishtalk.com/Plans for Reducing the Size of the Federal Reserve's Balance SheetIn January 2022, the Fed announced an intention to start QT.In May, the Fed announced itsPlans for Reducing the Size of the Federal Reserve's Balance Sheet.In June the Fed finally got around to doing QT.From January until March, despite a housing market totally out of control, the Fed kept doing QE (both treasuries and mortgage backed securities (MBS)Plan CapsBeginning on June 1, principal payments from securities held in the System Open Market Account (SOMA) will be reinvested to the extent that they exceed monthly caps.For Treasury securities, the cap will initially be set at $30 billion per month and after three months will increase to $60 billion per month. The decline in holdings of Treasury securities under this monthly cap will include Treasury coupon securities and, to the extent that coupon maturities are less than the monthly cap, Treasury bills.For agency debt and agency mortgage-backed securities, the cap will initially be set at $17.5 billion per month and after three months will increase to $35 billion per month.June 1, 2022 AssetsTotal Assets: 8,915,050Treasuries: 5,770,779MBS: 2,707,446August 24, 2022 AssetsTotal Assets: 8,851,436Treasuries: 5,700,628MBS: 2,725,906Three-Month Apparent ProgressTotal Assets: 8,915,050 - 8,851,436 = 63,614Treasuries: 5,770,779 - 5,700,628 = 70,151MBS: 2,707,446 -2,725,906 = -18,460Apparent Progress NotesThe key word regarding progress is the word "apparent".On August 20, I commentedYes, Quantitative Tightening by the Fed is Really HappeningHere is an explanation from Joseph Wang, a former senior trader who handled QE trades for the Fed.MBS Holdings Really Are DecliningThe Fed’s MBS holdings are decreasing, even if this is obscured by the sawtooth pattern of its holdings, which arises from the repayment and settlement schedule of MBS, wherein MBS bonds receive principal repayments on the 25thof the month and newly purchased MBS settle on the 15thof the month. The spikes in Fed MBS holdings arise from the settlement of newly purchased MBS; the declines are due to principal repayments. The Fed is still receiving MBS principal repayments each month that must be reinvested, so its MBS holdings continue to show periodic spikes even as overall MBS holdings are declining.The Fed’s policy of settling MBS purchases within a three-month window adds another wrinkle to understanding Fed MBS holdings. The Fed is the largest investor in the MBS market and aims to minimize any potential disruption by postponing MBS settlement if it judges that postponement would improve market functioning.This means some of the increases in the Fed’s MBS portfolio could arise from purchases conducted three months ago, including purchases from reinvesting principal received the period between the end of QE and the start of QT.These delayed settlements are recorded as commitments to buy MBS and have steadily declined over the months. These commitments obscure the steady drop of Fed MBS holdings but will dissipate in a few months.Just Wait for SeptemberQT is taking place exactly as the Fed has telegraphed and the balance sheet declines will become more apparent in the coming months. Soon the QT pace will quicken, and all past-purchased MBS will have settled. From that time, the Fed’s balance sheet will clearly and steadily decline each month.Projected Principal PaymentsNew York Fed Projected Payments
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      Fed QT Doubles in Sept, How Will it Impact the Market?
    • Capital_Insights·08-31Capital_Insights

      Citi: Semi Stocks May Fall Another 25%- The Level of 2020

      A Citigroup analyst warned Tuesday,The semiconductor industry is entering its worst downturn in 10 years, predicting that the chip sector could fall another 25 percent.Citi Research analyst Christopher Danley wrote in a report that the it's the first time that chip companies report general decline since pandemic.Although many analysts blamed this on a significant cooling of personal computer and smartphone sales due to the recession. However, they point to the continued strength of the automotive and industrial sectors as reasons for optimism.Danley does not see the same positives, however, and believes these strong sectors have shown signs of future weakness."We are also seeing the signs of a correction in the automotive and industrial end markets, and we continue to believe that the semiconductor industry is entering its worst downturn in a decade given the recession and increased inventories," Danley noted that executives from $Micron Technology(MU)$ and $Analog Devices(ADI)$ have both disclosed in recent weeks that orders from the automotive and industrial sectors orders have been canceled.Danley said, "We expect more companies to announce order cancellations from the automotive/industrial end market as capacity increases and demand weakens."Danley believes this will lead to further declines in chip stocks. He said, "We continue to believe that every business/end market will correct and we expect the $Philadelphia Semiconductor Index(SOX)$ to hit a new low and fall another 25%."Philadelphia Semiconductor Index is on track to record its biggest decline in 14 years. So far this year, the index is down 32%. If it remains unchanged, would be the index's biggest drop since 2008, when it fell 48%.According to FactSet data, $Philadelphia Semiconductor Index(SOX)$ last closed at a record high on Dec. 27 last year, when it closed at 4,039.51, The SOX components that have fallen the most this year include $NVIDIA Corp(NVDA)$ and $Marvell Technology(MRVL)$, with Nvidia shares down 48% and Marvell down 45% year to date.
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      Citi: Semi Stocks May Fall Another 25%- The Level of 2020
    • Capital_Insights·08-30Capital_Insights

      Earnings Outweigh Fed?-List of Companies Lowered Q3 Guidance

      As the Q2 earnings season comes to an end, the stock market rally also paused after Powell's speech.While everyone blames Powell for the market dive, an analyst from Morgan Stanley called on investors not to focus on Fed but on the company's earnings.1.Why do companies earnings outweigh Fed's policy?Morgan Stanley’s analyst holds that the most significant risk to stocks is weakness in earnings.Wilson said,While the first half of the year was dictated by Federal Reserve policy and tighter financial conditions, the second half will be determined by earnings expectations for next year.As a result, equity investors should be laser focused on this risk, not the Fed, particularly as we enter the seasonally weakest time of the year for earnings revisions, and inflation further eats into margins and demand.” Wilson warned that the biggest risk to the stock market will be weak earnings as companies tire of tightening financial conditions and soaring inflation, and earnings guidance will be revised down sharply in the second half of the year, when the stock market will really hit bottom.He writes that earnings expectations will fall by at least 5%, and possibly as much as 15-20%.While many companies are vulnerable to rising interest rates, Morgan Stanley believes tech companies are particularly at risk because they're over-valued.In addition, soaring interest rates have increased the cost of financing, increasing the risk for young and growth companies that haven't profited yet.In the Q1 and Q2  earnings season, we found that "the current results are far less than expectation" and "next quarter earnings guidance is less than expected" are the top 2 reasons behind stocks' plunge.Thus, this article summarized the companies that cut guidance for Q3, which might indicate opportunities because they may bottom out in Q2 or should be avoided because they lowered guidance again and again.2. Companies that Cut Guidance For Q3a. $Meta Platforms, Inc.(META)$ The company estimates revenues for Q3 between $26 billion and $28.5 billion. This would imply another quarter-over-quarter decrease for the business' growth. Analysts had expected $30.4 billion.b. $Roku Inc(ROKU)$ Roku guided for third-quarter revenue to increase just 3% year over year to $700 million, which was more than $200 million below what analysts were expecting.c. $Netflix(NFLX)$ The company is currently predicting a total of $7.84 billion in revenue. However, financial analysts had originally estimated $8.1 billion in revenue.d. $NVIDIA Corp(NVDA)$ The company is forecasting revenues of $5.9 billion for the period, which is $1 billion or 15% below the current consensus estimatee. $Micron Technology(MU)$ Micron's revenue guidance for the next quarter is $6.8-7.6 billion, significantly below market expectations of $9.14 billion.f. $Palantir Technologies Inc.(PLTR)$ On 8 AUG, Palantir posted a surprise loss in the quarter and also lowered its 2022 guidance.Looking ahead to the third quarter, Palantir said it expects sales to be between $474M and $475M, compared to estimates of $508.23M.g. $Salesforce.com(CRM)$ For the fiscal third quarter, Salesforce called for $7.82 billion to $7.83 billion in revenue.Analysts polled by Refinitiv had been looking for$8.07 billion in revenue.The revenue guidance would have been $250 million higher were it not for the impact of exchange rates, Salesforce said. h. $Zoom(ZM)$ $Zoom(ZM)$ not only missed the earnings estimates for the quarter but also lowered its full-year guidance.Management guided for revenue between $1.095 billion and $1.1 billion, compared to the eatimates of $1.15 billion.So, Zoom's guidance for both the top and bottom lines fell short of the analyst consensus estimate.Note: 1. In addition to these star companies in stock market, many retail and supermarket companies also lowered their Q3 guidance like $Nordstrom(JWN)$$Kohl's(KSS)$ because they suffered from the surging cost brought by inflation.In other words, the retail sector suffered directly from inlation as tech companies suffered much from rate hike.2. Social media and semiconductor sector performed badly due to weakness in ad and semi down cycle. But some companies also delivered excellent earnings in Q2 like $Trade Desk Inc.(TTD)$ in ad industry and $ON Semiconductor(ON)$ in semiconductor industry.The stock performance is closely connected to the broader market. But we also find that excellent earnings are always awarded by the market.Bottom LineIt's hard to decide there are opportunities or traps in the companies mentioned above. But it's quite certain that many companies are to lower guidance in the future and share prices may jump suddenly. There are some companies that missed expectations but did not provide guidance including $Snap Inc(SNAP)$$Roblox Corporation(RBLX)$, and $Unity Software Inc.(U)$.  Investors should be wary of these growth companies if the broader market become worse in Q3.
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      Earnings Outweigh Fed?-List of Companies Lowered Q3 Guidance
    • Capital_Insights·08-25Capital_Insights

      Q2 Highest Dividend Stocks of DJIA, SPX, IXIC To Focus

      These high-yield dividend stocks are sure to pay off. 1. $DJIA(.DJI)$ TOP 15 Component stocks BY Q2 2022 dividends. $Goldman Sachs(GS)$ ,$Amgen(AMGN)$$Home Depot(HD)$$IBM(IBM)$$United Parcel Service Inc(UPS)$$3M(MMM)$$Chevron(CVX)$$McDonald's(MCD)$ ,$Union Pacific(UNP)$$Norfolk Southern(NSC)$ ,$Caterpillar(CAT)$$Johnson & Johnson(JNJ)$$Duke(DUK)$$Honeywell(HON)$$Travelers(TRV)$ .2. $S&P 500(.SPX)$ TOP 15 Component stocks BY Q2 2022 dividends.$TransDigm(TDG)$$Public Storage(PSA)$ ,$Pioneer Natural Resources(PXD)$$BlackRock(BLK)$$CMS Energy Corp(CMS)$$Equinix(EQIX)$$Diamondback(FANG)$$Public Storage(PSA)$ ,$Simon Property(SPG)$$Whirlpool(WHR)$$Northrop Grumman(NOC)$$W.W. Grainger(GWW)$$Air Products & Chemicals(APD)$ ,$Cummins(CMI)$$Devon(DVN)$ .See from the industrial information ,more are from energy and real estate sectors. 3. TOP 15 $NASDAQ(.IXIC)$ Component stocks BY Q2 2022 dividends.$Broadcom(AVGO)$ ,$European Wax Center, Inc.(EWCZ)$ ,$Chesapeake(CHK)$ ,$John B Sanfilippo & Son(JBSS)$$Icahn Enterprises LP(IEP)$$Star Bulk Carriers(SBLK)$$Virtus Investment Partners(VRTS)$$Diamond Hill Investment(DHIL)$$Cracker Barrel Old Country Store(CBRL)$$KLA-Tencor(KLAC)$$Chord Energy Corp(CHRD)$$T. Rowe Price(TROW)$$ASML Holding NV(ASML)$$Pepsi(PEP)$$Texas Instruments(TXN)$ .Most of the stocks with higher dividends among the Nasdaq components come from the semiconductor and equipment production sectors, diversified financial sectors, consumer services and food, beverage and tobacco sectors.Dividends can be a great way to give your investment portfolio a boost of income, which is something many people are looking for during periods of high inflation and amid talk of a possible recession. Dividend stocks or dividend funds can help you earn regular passive income from some of the strongest companies in the economy.You may interested in:  15 Stocks with Highest EPS Hike in Q2 and See Profit Rise in Q3 2022Do you HOLD 1 or 2  high dividend stocks from the above lists?Please share your choice and why to Tigers
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      Q2 Highest Dividend Stocks of DJIA, SPX, IXIC To Focus
    • Capital_Insights·08-24Capital_Insights

      Institutions' Short Positions Over $125 Bln - The End of Summer Rally

      After about 1 month of rally, policy expectations are signaling a reversal and U.S. stocks are beginning to retreat.HighlightsThe Fed believes that inflation remains at a disturbingly high level, and officials reiterated determination to keep prices down.Institutions are concerned that rate hikes may exacerbate the risk of a potential recession and thus impact the stock market. Retail investors may face a new round shock from shorting funds.1. Retail Investors Remain ActiveSince the Fed's June resolution, US stocks have enhoyed a rebound, with $NASDAQ(.IXIC)$ rebounding nearly 25% from its low and once entered a technical bull market.High enthusiasm from retail investors is an important factor driving the rally. According to Vanda Research, retail investors' purchases are now averaging $1.36 billion a day, and the rolling 21-day average is above $27 billion.Investors' frenzy in Meme stocks such as $Bed Bath & Beyond(BBBY)$ , GameStop and AMC reached a climax last week. In the case of $Bed Bath & Beyond(BBBY)$ , Vanda Research said individual buying and call option trading volume spiked to more than 70x of its historical average in the past. However, analysts said that:"Retail investors' influence on the market will wane, and the stock market will likely see more tug-of-war starting in late August when most institutional investors return from their summer vacations."2. Analysts Are Bearish On The Stock MarketBoris Schlossberg, macro strategist at BK Asset Management, said that while U.S. stocks will not necessarily test the lows of the first half of the year, investors should not be too optimistic."Looking at the trend in US Treasury yields, investors are betting that the Fed will continue to raise rates sharply because consumer demand remains strong and inflation is still hot. The potential risk is that the Fed will overreact in controlling demand, which in turn could hit the economy."Goldman Sachs believes that inflation data and the economic growth will drive stock market movements in the second half of the year. But after the best summer rally ever in US stocks, they see limited room for continued gains.David Kostin, chief U.S. equity strategist at Goldman Sachs, said"A renewed flood of recession fears will almost certainly reverse the recent rally."Citi strategist Dirk Willer noted that U.S. stocks have recovered most of their losses from the first half of the year, but they will turn down again due to the recent resurgence of market fears of rate hike, advising investors to reduce their holdings."The current bear rally in U.S. stocks is almost in line with the average duration of previous bear rallies. It suggests that this bear rally in U.S. stocks could end relatively soon."3. Hedge Funds Short Positions Reaches $125 billionData shows that institutions are increasing their shorting positions, betting that the current rally in U.S. stocks will come to an end. According to the latest statistics from BNP Paribas,Institutional short positions against US equities have exceeded $125 billion, up $18 billion from a year ago.Greg Boutle, head of U.S. equity derivatives strategy at BNP Paribas, said that many positions "remain on the defensive" and highlighted the increasing short positions on U.S. stocks. According to financial data provider Refinitv Lipper data, the last three months, global capital flows continue to show a strong interest in "shorting preference" investment.In July, inflows to Lipper's dedicated short funds were approximately $3.2 billion, the highest since April 2020, as the Federal Reserve raised interest rates and investors questioned the durability of the U.S. economy.According to Refinitiv Lipper,The average return of The Diversified U.S. Equity Fund was -14.2% this year, but its short fund grew 8.8% over the same period.It's important to note that headwinds remain. Most importantly, the Fed has a lot of work to do to reduce inflation.
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      Institutions' Short Positions Over $125 Bln - The End of Summer Rally
    • Capital_Insights·08-23Capital_Insights

      Beware: 5 Reasons to Fall Back into a Bear Market

      Some market experts are starting to worry that this summer's rally in U.S. stocks may be starting to fade after stocks swooned from oversold to overbought.On last Friday, the $S&P 500(.SPX)$ fell 1.3%, the $NASDAQ(.IXIC)$ fell 2% on Friday, and the $DJIA(.DJI)$ fell 0.9%; the $S&P 500(.SPX)$ fell 2% , the $NASDAQ(.IXIC)$ fell 2.55%, and the $Dow Chemical(DOW)$ fell 1.91% on this Monday.Below lists five reasons why US stock may continue to decline, cited institutions's analysis from Goldman Sachs and Citigroup: 1. Defensive Sector Started to Lead the MarketCyclical sectors once performed well along with U.S. stocks rebounded in July and early August. But that trend appeared to come to an end last week, with defensive sectors regaining the lead. On the other hand, the two worst-performing sectors were cyclical, materials and communications services. $Materials Select Sector SPDR Fund(XLB)$ , which tracks the former, fell 2.4% last week, while $Communication Services Select Sector SPDR Fund(XLC)$ fell 3.1%.You may interested in Weekly: Defensive Sector Leads The Market, Bear Rally Ended?!Goldman said,"One sign that investors are getting nervous is that cyclicals are underperforming defensives, and we're starting to see that now,"2. U.S. Bond Yields rose Since AugustThe 10-year Treasury yield has climbed 35 basis points since Aug. 1st and rose14 basis points since last Monday to now 2.897%.Rising U.S. Treasury yields will trouble U.S. stocks because it makes bonds a relatively more attractive investment. U.S. stocks and bonds often move in unison at the start of the year, as expectations of tighter monetary policy from the Federal Reserve weigh on both assets.Goldman and the rest of Wall Street are now waiting to see if stocks will follow bond prices decrease.3. A Higher Dollar May Accompany a Weaker Stock MarketRising U.S. Treasury yields and weaker inflation pushed the dollar higher, creating another potential headwind for stocks. The ICE U.S. Dollar Index topped 108 on Friday, rising to its strongest level in a month.A strong dollar typically accompanies a weaker stock market, as a stronger dollar can adversely affect the value of U.S. multinationals' overseas profits in dollar terms.4. Cryptocurrencies also FallingThe recent moves in cryptocurrencies such as bitcoin and ethereum have been almost in step with stocks, particularly large-cap tech stocks such as $Meta Platforms, Inc.(META)$ and $Netflix(NFLX)$ .But cryptocurrencies fell sharply on Friday, prompting some market participants to speculate whether stocks could follow suit.Goldman said,“Another sign of a pause in the rally in U.S. stocks is weakness in cryptocurrencies. It’s a clear sign of a risk-off trend in the market,”5. Stock Valuations Rebound but Corporate Profit Expectations DeclineAnother reason to question the U.S. stock market rally is the apparent discrepancy between stock valuations and corporate profit expectations.As Goldman points out, the average forward price-to-earnings ratio for S&P 500 companies has rebounded to 18.6 times from a mid-June low of 15.5 times. Meanwhile, the average earnings-per-share forecast for these companies over the next 12 months fell from $238 to $230."Equity valuations are rising, while profit expectations are falling," Goldman said.Citigroup U.S. equity strategist Scott Chronert also said in a recent research note to clients of the bank that the risk of a decline in public company profits as we approach 2023 could weigh on stock valuations."If the stock market strengthens further, a tactical rallies sell is justified," he said.Assuming US stocks continue to fall?Where do you think U.S. stocks will fall to support?1.Above 3900 point?2. Above 3600 point?3.Below 3600 points?
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      Beware: 5 Reasons to Fall Back into a Bear Market
       
       
       
       

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