Nomura’s McElligott Explains The ‘Perfect Virtuous Feedback Loop’ As Gamma Gravity Pins Equities

All of the big moves markets witnessed over the summer had one thing in common. We've been over this before. But we're going to go over it again. And you're going to like it. "Price movements over this summer once again clearly emphasized the spot/gamma/realized vol dynamics", SocGen wrote, in a September note documenting a crucial dynamic that can always be described as "underappreciated" until everyone understands it. "All the big daily moves (magnitudes larger than 1.5%) occurred when the p

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3 thoughts on “Nomura’s McElligott Explains The ‘Perfect Virtuous Feedback Loop’ As Gamma Gravity Pins Equities”

BTFD

As long as tariffs get rolled back in a trade deal, seems like in short-term should be smooth sailing for stocks and other risk assets. Suppose some bad econ data pops up in Jan – easy for investors to ignore as backward-looking and soon to be mitigated by tariff rollback, plus investors less anxious at start of year. Impeachment process likely to be ignored by investors since Senate won’t convict. Election not a big factor until further into 2020, and if investors think Senate control isn’t going to switch and/or Warren/Sander won’t be nominee, election factor should stay muted.

So basically, it is in Trump/Xi’s hands in the short-term. Sure, prices largely bake in a deal, and a sell-the-news reaction is possible, ibut not seeing why it’d be a big one.