Industrial shares are on a tear, junk-bond spreads are narrowing, quants are ramping up Treasury shorts and everyone is piling into stocks.
What was once scepticism among investors has become something approaching euphoria.
Cash and hedges are out, replaced by demand for everything from small caps to meme stocks. Fuelling the surge is data showing the US economy is thriving as evidence mounts that the Federal Reserve is beating inflation.
All the optimism has sent the S&P 500 to the brink of its sixth advance in seven months and pushed prices in the Nasdaq 100 to almost 35 times profit.
It’s manna for bulls – even as it leaves them with precious little wriggle room should anything in the economy or monetary policy not unfold as hoped.
“It’s dangerous and consensus, but it’s late July, so who feels like fighting it?” said Peter Tchir, head of macro strategy at Academy Securities.
“We are now at the stage where people feel obligated to fully commit capital. Hawkish Fed is not an excuse right now, and claiming recession is hard to justify as well.”
Economic data keeps defying bearish predictions – everything from gross domestic product to consumer confidence and hiring have beaten forecasts.
Reports on Friday showed the US employment cost index had its slowest advance since 2021 in the second quarter, while the Fed’s preferred inflation gauge posted the smallest increase in more than two years.
Good news on the economy is sucking more investors into risky assets.
A steady expansion in speculative spirits has pushed equity positioning to the highest level since January 2022.
Investors have a clear overweight exposure to stocks after long refusing to budge off their underweight positioning, according to Deutsche Bank.
At the same time, a wide array of hedging metrics is showing low demand for downside protection.
Put premiums for both Invesco QQQ Trust Series 1 (QQQ) and the SPDR S&P 500 ETF Trust (SPY) are hovering around the lowest levels in at least a decade, according to RBC Capital Markets.
Additionally, investors are buying more calls to chase the rally while spending less to protect their gains.
“The market is just not ready to let go of the positive narrative. Hedging is outrageously cheap,” said Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets.
“There’s more driving of demand of calls from folks who are underperforming than those who have done well and need to hedge.”
While bullish bets are paying off now, all the optimism strikes some as worrisome given the litany of hazards that still face investors.
Markets showed their skittishness in Thursday’s session when the prospect of a mild policy tightening in Japan knocked the S&P 500 down more than 1 per cent intraday, although the drop was rolled back in the next session.
Count Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, among those who say the euphoria has been taken too far.
He recently revised equity positioning from overweight to neutral while moving to overweight bonds, and says a recession is still well within the realm of the possible.
“Those same people who are probably piling in right now were wrong about their outlook nine months ago and now they’re reversing course,” Mr Schutte said.
“I’m pushing in the opposite direction. The equity market will have some difficult months ahead.”
The Treasury market has lately seen fast-money short bets expanding, with hedge funds overall pushing up bearish wagers to historic levels.
Those same people who are probably piling in right now were wrong about their outlook nine months ago and now they’re reversing course
Count Brent Schutte,
chief investment officer, Northwestern Mutual Wealth Management
Leveraged funds have been boosting overall shorts on US bond futures since March, according to a gauge of aggregate net positions based on data from the Commodity Futures Trading Commission.
Fast-money quants known as commodity trading advisers have been amassing a big short bet since May.
JP Morgan Chase strategist Nikolaos Panigirtzoglou estimates that they are sitting on a $150 billion short bond position that they may unwind in a rally.
The flip side of the extreme shift is that negative surprises can have an outsize influence.
In March, banking turmoil caused equities to sink and Treasuries to rally, forcing commodity trading advisers to unwind $200 billion of bonds in the span of a few days, according to JP Morgan Chase. A growth scare could reprise this episode.
Nevertheless, it will be hard to stop the market momentum.
Strategists have revised upwards their S&P 500 targets and economists have softened their dire predictions.
Some of the biggest downside risks threatening the economy – inflation rising to a four-decade high, a looming recession – have since faded.
“It would require a massive rally in bonds that would probably only occur with some sort of growth scare from a data shock,” said Charlie McElligott, cross-asset strategist at Nomura Securities International.
“We have seen economic growth data hold, labour staying firm, and even US housing is recovering.”
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
MOTHER%20OF%20STRANGERS
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MATCH INFO
Uefa Champions League quarter-final, second leg (first-leg score)
Porto (0) v Liverpool (2), Wednesday, 11pm UAE
Match is on BeIN Sports
THE BIO: Mohammed Ashiq Ali
Proudest achievement: “I came to a new country and started this shop”
Favourite TV programme: the news
Favourite place in Dubai: Al Fahidi. “They started the metro in 2009 and I didn’t take it yet.”
Family: six sons in Dubai and a daughter in Faisalabad
UAE currency: the story behind the money in your pockets
Episode list:
Ep1: A recovery like no other- the unevenness of the economic recovery
Ep2: PCR and jobs - the future of work - new trends and challenges
Ep3: The recovery and global trade disruptions - globalisation post-pandemic
Ep4: Inflation- services and goods - debt risks
Ep5: Travel and tourism
Christopher Robin
Starring: Ewan McGregor, Haley Atwell, Jim Cummings, Peter Capaldi
Three stars
2021 World Triathlon Championship Series
May 15: Yokohama, Japan
June 5: Leeds, UK
June 24: Montreal, Canada
July 10: Hamburg, Germany
Aug 17-22: Edmonton, Canada (World Triathlon Championship Final)
Nov 5-6 : Abu Dhabi, UAE
Date TBC: Chengdu, China
Women’s World T20, Asia Qualifier, in Bangkok
UAE fixtures Mon Nov 20, v China; Tue Nov 21, v Thailand; Thu Nov 23, v Nepal; Fri Nov 24, v Hong Kong; Sun Nov 26, v Malaysia; Mon Nov 27, Final
(The winners will progress to the Global Qualifier)
Score
Third Test, Day 1
New Zealand 229-7 (90 ov)
Pakistan
New Zealand won the toss and elected to bat
RECORD%20BREAKER
%3Cp%3E%3Cstrong%3EYoungest%20debutant%20for%20Barcelona%3A%3C%2Fstrong%3E%2015%20years%20and%20290%20days%20v%20Real%20Betis%3Cbr%3E%3Cstrong%3EYoungest%20La%20Liga%20starter%20in%20the%2021st%20century%3A%20%3C%2Fstrong%3E16%20years%20and%2038%20days%20v%20Cadiz%3Cbr%3E%3Cstrong%3EYoungest%20player%20to%20register%20an%20assist%20in%20La%20Liga%20in%20the%2021st%20century%3A%20%3C%2Fstrong%3E16%20years%20and%2045%20days%20v%20Villarreal%3Cbr%3E%3Cstrong%3EYoungest%20debutant%20for%20Spain%3A%3C%2Fstrong%3E%2016%20years%20and%2057%20days%20v%20Georgia%3Cbr%3E%3Cstrong%3EYoungest%20goalscorer%20for%20Spain%3A%3C%2Fstrong%3E%2016%20years%20and%2057%20days%3Cbr%3E%3Cstrong%3EYoungest%20player%20to%20score%20in%20a%20Euro%20qualifier%3A%3C%2Fstrong%3E%2016%20years%20and%2057%20days%3C%2Fp%3E%0A
KILLING OF QASSEM SULEIMANI
Countries recognising Palestine
France, UK, Canada, Australia, Portugal, Belgium, Malta, Luxembourg, San Marino and Andorra
More from UAE Human Development Report:
BLACK%20ADAM
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From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
PROFILE OF INVYGO
Started: 2018
Founders: Eslam Hussein and Pulkit Ganjoo
Based: Dubai
Sector: Transport
Size: 9 employees
Investment: $1,275,000
Investors: Class 5 Global, Equitrust, Gulf Islamic Investments, Kairos K50 and William Zeqiri
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Freezer tips
- Always make sure food is completely cool before freezing.
- If you’re cooking in large batches, divide into either family-sized or individual portions to freeze.
- Ensure the food is well wrapped in foil or cling film. Even better, store in fully sealable, labelled containers or zip-lock freezer bags.
- The easiest and safest way to defrost items such as the stews and sauces mentioned is to do so in the fridge for several hours or overnight.
CHATGPT%20ENTERPRISE%20FEATURES
%3Cp%3E%E2%80%A2%20Enterprise-grade%20security%20and%20privacy%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Unlimited%20higher-speed%20GPT-4%20access%20with%20no%20caps%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Longer%20context%20windows%20for%20processing%20longer%20inputs%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Advanced%20data%20analysis%20capabilities%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Customisation%20options%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Shareable%20chat%20templates%20that%20companies%20can%20use%20to%20collaborate%20and%20build%20common%20workflows%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Analytics%20dashboard%20for%20usage%20insights%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Free%20credits%20to%20use%20OpenAI%20APIs%20to%20extend%20OpenAI%20into%20a%20fully-custom%20solution%20for%20enterprises%3C%2Fp%3E%0A
The%20specs
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MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
MATCH INFO
Champions League quarter-final, first leg
Ajax v Juventus, Wednesday, 11pm (UAE)
Match on BeIN Sports
What is blockchain?
Blockchain is a form of distributed ledger technology, a digital system in which data is recorded across multiple places at the same time. Unlike traditional databases, DLTs have no central administrator or centralised data storage. They are transparent because the data is visible and, because they are automatically replicated and impossible to be tampered with, they are secure.
The main difference between blockchain and other forms of DLT is the way data is stored as ‘blocks’ – new transactions are added to the existing ‘chain’ of past transactions, hence the name ‘blockchain’. It is impossible to delete or modify information on the chain due to the replication of blocks across various locations.
Blockchain is mostly associated with cryptocurrency Bitcoin. Due to the inability to tamper with transactions, advocates say this makes the currency more secure and safer than traditional systems. It is maintained by a network of people referred to as ‘miners’, who receive rewards for solving complex mathematical equations that enable transactions to go through.
However, one of the major problems that has come to light has been the presence of illicit material buried in the Bitcoin blockchain, linking it to the dark web.
Other blockchain platforms can offer things like smart contracts, which are automatically implemented when specific conditions from all interested parties are reached, cutting the time involved and the risk of mistakes. Another use could be storing medical records, as patients can be confident their information cannot be changed. The technology can also be used in supply chains, voting and has the potential to used for storing property records.
Miss Granny
Director: Joyce Bernal
Starring: Sarah Geronimo, James Reid, Xian Lim, Nova Villa
3/5
(Tagalog with Eng/Ar subtitles)
COMPANY%20PROFILE%20
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3ENomad%20Homes%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2020%3Cbr%3E%3Cstrong%3EFounders%3A%20%3C%2Fstrong%3EHelen%20Chen%2C%20Damien%20Drap%2C%20and%20Dan%20Piehler%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%20and%20Europe%3Cbr%3E%3Cstrong%3EIndustry%3C%2Fstrong%3E%3A%20PropTech%3Cbr%3E%3Cstrong%3EFunds%20raised%20so%20far%3A%3C%2Fstrong%3E%20%2444m%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Acrew%20Capital%2C%2001%20Advisors%2C%20HighSage%20Ventures%2C%20Abstract%20Ventures%2C%20Partech%2C%20Precursor%20Ventures%2C%20Potluck%20Ventures%2C%20Knollwood%20and%20several%20undisclosed%20hedge%20funds%3C%2Fp%3E%0A
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
