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The AM Call: Was It All a Dream? If anyone was off-the-grid through the first two weeks of August, they could be forgiven for thinking not much happened in the markets during that time. Following last week’s equities rally (SPX +4%, CCMP +5.3%), broad U.S. equities are now slightly higher for the month of August. Bonds rallied as well, with the 10Y below 4% again at 3.87% as of this writing. The positive sentiment came after CPI data was in-line, leading markets to price in a September rate cut with certainty. Read more by clicking the link below and visiting our blog.

The AM Call: FOMO, Momo, Markets A-GoGo Equities continued to “melt up” with the S&P 500, Dow, and Nasdaq all touching all-time highs. The positive momentum in equities followed in-line CPI data which eased concerns in the markets, leading to risk-on sentiment with oil, gold, and fixed income all higher on the week, along with the record-topping equity indices. Read more by clicking below and visiting our blog.

📢 How can high-frequency factors improve intraday market return predictions? Can we trade SPY intraday following the paper's ideas? Keep reading! ⬇ The paper "Intraday Market Return Predictability Culled from the Factor Zoo" leverages LASSO and financial econometrics to forecast market returns effectively. The study makes several key contributions: 👉 Lagged Cross-Sectional Returns: The paper demonstrates strong intraday market return predictability using lagged high-frequency returns from a broad set of risk factors. This approach captures nuanced market dynamics. 👉 Predictive Power: LASSO regularization effectively distills pertinent information, differentiating between continuous and discontinuous price increments. This enhances model robustness and predictive accuracy. 👉 Economic Mechanisms: Superior performance is traced to periods of high economic uncertainty, driven by factors related to tail risk and liquidity. This suggests slow-moving capital and gradual information incorporation as underlying mechanisms. 👉 Trading Performance: Strategies utilizing these forecasts generate impressive out-of-sample Sharpe ratios and alphas. For example, a market timing strategy on the SPY ETF achieves an annual intraday Sharpe ratio of 0.79, compared to 0.09 for a buy-and-hold strategy, with an annualized Fama-French six-factor alpha of 7.99%. 👉 Key Factors: SHAP value decompositions highlight liquidity and market friction factors as primary drivers of Sharpe ratios and alphas, aligning with classic return cross-autocorrelation findings. In summary, the paper underscores the potential of high-frequency cross-sectional returns and LASSO regularization in predicting intraday market returns, offering substantial economic gains and robust performance during volatile periods. ----------------------- → Join 2500+ Asset Pricing & ML/DL enthusiasts who receive top new research ideas weekly in their email.: https://lnkd.in/dkxSDJpq ----------------------- Link to the paper: https://lnkd.in/dFR9rWxU

As markets brace for a Fed rate cut, Man Group's MacroScope model provides insights into current market dynamics and what could mean for portfolios based on historic regimes - in this week's Views from the floor #investing #markets https://lnkd.in/g_475_-6

The AM Call: Sideways It was relatively quiet in the markets last week with both bonds and global equities mixed. Large cap U.S. equities rose, while the Nasdaq and Russell were flat. In Treasuries, the long-end sold off slightly while the front-end held in. Oil and gold were also mostly unchanged. As 1Q24 earnings season is mostly over, and the Fed clearly in a waiting game to cut rates, there were no obvious drivers for markets last week. The week ahead should be more impactful, with April inflation data hitting the tape. Read more by clicking below and visiting our blog.

For those who say mega-caps are fairly priced relative to the rest of the market, quantitative data begs to differ. According to the chart below, the median price/sale ratio of the 50 largest-caps is significantly more expensive than the smallest S&P 500 large-caps (3.5x to 1). Even broadly looking at all 10 ranks, there appears to be a general pattern demonstrating the larger the market cap of the rank, the more expensive the P/S ratio. Apologies but in my view, these are further indisputable data points to support elevated market risk that’s simply not priced in. Sources: OVOM Research, FactSet #Research #Economy #Markets #Macro #Equities

Insight | The real effective exchange rate index uses inflation indices and consequently suffers from many biases. Embracing a big data analytics approach, actual trade-based REER is advocated which uses a near real-time index of trade data. The methodology does away with inflation indices altogether and is unlikely to suffer from any omission, quality, or inclusion and exclusion bias. https://lnkd.in/diXrJTFQ

Colivar Weekly Market Pulse (by Dr. Mahnoosh Mirghaemi) for SwissFinTechLadies Unpacking Last Week’s Volatility and Anticipating Market Trends The past week in the financial markets was anything but calm, characterised by significant volatility and dramatic price swings. The S&P 500, a bellwether for U.S. equities, experienced over a 200-point fluctuation, ultimately closing the week down just 0.2%. This came after a surge in the VIX, the market’s fear gauge, which initially spiked but began to revert to more typical levels by the end of the week. These movements underscored the market’s tendency to return to its long-term averages, especially in the absence of sustained market shocks. Read the full market pulse here:

Colivar Weekly Market Pulse (by Dr. Mahnoosh Mirghaemi) for SwissFinTechLadies Unpacking Last Week’s Volatility and Anticipating Market Trends The past week in the financial markets was anything but calm, characterised by significant volatility and dramatic price swings. The S&P 500, a bellwether for U.S. equities, experienced over a 200-point fluctuation, ultimately closing the week down just 0.2%. This came after a surge in the VIX, the market’s fear gauge, which initially spiked but began to revert to more typical levels by the end of the week. These movements underscored the market’s tendency to return to its long-term averages, especially in the absence of sustained market shocks. Read the full market pulse here:

Welcome to Syz Group hashtag#globalmarkets weekly wrap-up! You can subscribe to our newsletters through syzgroup.com/newsletter or by using the QR code at the end of the document. CHART OF THE WEEK: Will the ECB be forced to cap French yields?  For the 1st time since 2017 (when “Frexit” was a threat), the French 10 Year sovereign bond spread relative to German bonds is flirting with 80 basis points. If French yields are allowed to spike, there could be immediate contagion to Italy and Spain, where large debt overhangs are worse than ever. You can already see those contagion effects playing out in French and Italian spreads now... WEEKLY SUMMARY: Top Tech US Trio Melts Up, Europe Melts Down The major US equity indexes ended mostly higher for the week, with the S&P 500 Index and Nasdaq Composite touching new highs. The market’s advance remained exceptionally narrow for the 2nd consecutive week, however, with an equally weighted version of the S&P 500 trailing its more familiar, capitalization-weighted counterpart by 2.15%. The AI euphoria continues to provide a continuing tailwind to tech-related stocks and growth shares, which outpaced value stocks by the largest margin since March 2023 (461 basis points). Another factor behind growth shares’ outperformance may have been reassuring inflation data and falling bond yields. US headline CPI inflation was flat in May for the first time in nearly two years. Producer price index (PPI) inflation also surprised on the downside, with core PPI falling back to 2.3% yoy, marking an end to five consecutive months of increases. The downside inflation surprises pushed the yield on US 10-year notes sharply lower for the week, from 4.43% to 4.21%. The Fed left rates unchanged, as was widely expected, but officials increased their median expectation for the Fed funds rate at the end of 2024 significantly, from 4.6% to 5.1%, which would imply only one cut later in the year. The STOXX Europe 600 Index returned -2.39% as political uncertainty undermined confidence following the strong showing by far-right parties in the European Parliament elections the previous weekend. The OAT-Bund spread soared while the euro tumbled. Gold was bid. Cryptos sold off. Have a great week-end!