Flash Crash … (TWTW – May2-6, 2022)

Flash Crash … What a week … On Monday, as I recall, European markets kicked things off with a “flash crash”. Were they looking to mark the anniversary of the May 6th, 2010 flash crash a few days early? Who knows … It, of course, didn’t stop there…

On Wednesday, the FOMC decision to raise rates 50 bps (consensus and widely communicated), allowed markets to rise sharply (on the comment made by JP that 75bps weren’t on the consideration list going forward). Then on Thursday, what on Wednesday had provided solace to market participants (that the FED wasn’t going to whack participants with 75 bps any time soon …) gave way to a rethink (is the FED behind the proverbial 8 ball (yes!), respectively how damaging will that then prove to be? And boom, Thursday was nasty. Friday started pretty much as a continuation of Thursday, ending modestly better – presumably on some selling exhaustion …

BoC raised rates also – incidentally.

Unchartered waters => Tudor Jones => click HERE!

Speaking to the fact that the environment we’ve entered … is NOT gonna be very kind to either bonds, or equities …

Activision Blizzard => the stock benefited from the disclosure last week-end at the yearly Nebraska pilgrimage (Buffett’s 🙂 ) that the Oracle was playing merger/takeover arbitrage, respectively betting, effectively, that MSFT was going to “consume” their takeover of the gaming company.

Elliott Management => laid out for Suncor’s management what their rationale and vision was, that should result in the company’s stock rising sharply, and thus making up for some of its relative performance deficit …

The FEDs raised rates, with several more 50 bps in store going forward

3% 10 years => actually at 2.94% at week’s end (but also with no reprieve in terms of relative performance, as the 20 year ETF TLT, for instance, lost a further 1.55% on Friday alone …).

Oil prices – Russian crude ban by European customers by EOY? Gave impetus for Oil prices to move higher last week …

Horizons’ class action lawsuit – once upon a time … people played around with “Volatility / VIX” exposures … which … ended badly (with if I recall, ultimately the category suffering such losses that some ETFs – maybe all, don’t recall – ended up being shutdown …). Anyways, some people got hurt … and they are suing the Canadian ETF provider. THIS, in my opinion, is a case of some “investors” looking for a free put on speculative decisions they made that they didn’t like the outcome of which … Going after the deep pockets of the provider if you will … IMO these folks either knew, OR should certainly have known what they were playing with. AND if they did NOT, they the question is: who advised them? and why didn’t they know? My 5 cents on that one …

China’s lockdown … That whole ZERO Covid-19 tolerance policy in China causing … concerns, to say the least, as well as no doubt having terrible consequences for the well-being of the population there. WHY?

Starbucks – rallied strongly on reporting results Wednesday. By Friday, a chunk of that had been reclaimed by an unforgiving market …

FOMC reprieve rally – fizzled rather badly Thursday and Friday (more repricing ahead?)

FWIW: Hard to figure out where to next. On the one hand, lots (and lots) of stocks have been selling off so hard, one can no longer argue that they’ve entered a very severe bear market. Looking at it through that lense, hope things can’t get much worse from here? On the other, the “correction” in the S+P from the highs leaves plenty of room for downward price moves, with the NASDAQ only recently entering official bear market territory. + well, there is the chorus (still) of … the FED will be stopped in its tracks by the severity of the impact they have already had on the markets overall. My take on it? Probably not over until the fat lady sings as they say … Risks abound … still …

Weekly Performance – Sectors; Thematic; Factors

 

  • NOT much … going right this past week in markets: ENERGY, bolstered by continuing release of very strong financial results in the sector.
  • Everything else … not so much. Canadian Technology hammered primarily with SHOPIFY continuing NOT to find a footing, even after the very severe losses already sustained since the long forgotten November 2021 highs …
  • REITS – forget the defensive nature of REITS … the space just joined to the downside … does that portend rising recession fears?

  • Cyber leading to the downside … does this suggest that we’re in the final phase of the Thematic sell-off? the others having already tumbled, and thus no longer needing major price adjustments? Not sure … but Noteworthy imo

  • After the kind of week we just had – to see Value and Fundamentals end in positive territory says something? No? it says … ENERGY is the differentiator as far as determining relative performance, something I have now been highlighting for some time …

YTD Performance – Sectors; Thematic; Factors

  • Materials having given back most of recent outperformance = opportunity to reload in that space as opposed to playing old leadership (aka tech?)
  • Canadian Tech – deep bear
  • US Tech – just entered the bear
  • healthcare, utes, and staples … should continue to work as defensive plays …

  • Not many themes to be found in the “not yet in a bear market” territory …
  • Travel and Leisure: a relative trade until we get into recession, at which point outlook post “pent-up” reopening demand phase darkens?
  • Not shown here: strong Carbon Credit performance last week (=> anticipation of higher prices as world needs to get more production going – requiring more credits to be purchased by “emitters”?)
  • Nuclear – continued sell-off after recent highs. Opportunity to reload? Hard to think rising Oil prices should not ultimately have an impact in terms of need to re-think the role of nuclear going forward … something which earlier already led to significant gains for stocks in the sector. Sell-off has been sharp. recovery might require more time, but fingers crossed should reasonably be in the cards.

  • Growth and ESG in “correction” territory
  • Value, Fundamental and Quality dividends in favour at this stage
  • Min Vol “delivering” in relative performance terms vs market
  • NASDAQ: Bear Market territory … S+P on its way there?

Enjoy – the week-end!

Happy Mother’s Day to all the mothers 🙂