The Biggest Risk, A Key BTFD Line, And What We ‘Don’t Know’

Ok, BofAML is out with another one of their surveys (they conduct a lot of them) and the results contain some possibly useful tidbits and at least one pretty amusing visual anecdote.

Now one thing to note, before we get into that, is that BofAML’s Adarsh Sinha doesn’t seem to be as optimistic as his tarot-card-reading colleague Stephen Suttmeier, who was out with this bit of line-based prognostication on Friday:

Scenario 2: Stay above 200-day MA

Above MA through July but stays above the rest of year

The second and slightly less likely scenario when the S&P 500 has not had a YTD daily close below its 200-day MA as of the end of July is staying above this MA on a daily closing price basis for the rest of the year. This implies minimal impact from bearish August-October seasonality and a continued strong uptrend. This scenario has 13 observations. The August-December and annual returns are positive 100% of the time. Dip to 2415-2400; year-end upside to 2647-2690 & 2800+


Meanwhile, back in the real world where lines are just … well, just lines … the above-mentioned Adarsh Sinha has this to offer:

The market optimism implied by our factor analysis also means that the bar to positively surprise expectations has ratcheted higher. This is best captured by global data surprises that have collapsed towards zero in recent months, arguably driven by upward revisions to expectations rather than actual weakening of data outcomes. Along with positioning, this explains the heightened sensitivity of the rates market to negative data surprises. Moreover, it is hard to see global stocks performing well if data surprises turn negative (Chart 3).


So you can draw your own conclusions about who to believe there.

As far as the bank’s clients go, here are the responses from the latest FX and Rates survey question “What are you most concerned about over the next three months“:


Amusingly, then, folks aren’t as concerned about an equity correction as they were last month, although that still tops the worries list, but are instead more concerned relative to July about disappointing US data. That matches up well with the decrease in concern about “stubborn hawkishness” as the more likely you think it is that the data disappoints, the less likely you are to believe that central banks will get too aggressive, all else equal.

Putting that all together: worse data = less hawkishness = less chance of risk asset correction. Or, more simply: “bad news is good news.”

And then there’s the punchline and predictably, it relates to Trump.

When asked what they “expected” the President to do with regard to the next Fed Chair, the most popular response was “Don’t know.”


Which isn’t exactly surprising because trust us, Trump “don’t know” either…

don't know


One thought on “The Biggest Risk, A Key BTFD Line, And What We ‘Don’t Know’

  1. Perhaps add a bar for ‘Prioritize someone* who he knows will benefit him’ would capture some of those ‘Don’t Know’ votes and maybe a few more from the first two (blue and gold bars)!

    (* financial experience not required)

    – Murphy

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