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‘Mania Has Taken Hold’, And Other Observations As The Tape Goes ‘Macro’

"It’s a macro tape, you’re just living in it".

“It’s a macro tape, you’re just living in it”, Nomura’s Charlie McElligott wrote Wednesday morning, underscoring the notion that markets have become a slave to coronavirus headlines and, to a lesser extent, the ebb and flow of the Democratic primaries in the US.

On Tuesday night, I wrote about the perpetually applicable “investors want to be long USTs” chyron, a fixture on business television. Because the Fed is on hold, curve directionality is dictated by the long end, which means a bias for incremental bull flattening in the current environment.

“UST cash curves are again bull-flattening in grinding fashion off the back of sustained coronavirus ‘global growth scare’ concerns”, McElligott went on to write Wednesday, before making a couple of quick points about gold’s run, which he attributes at least as much to US real yields hitting multi-year lows as to any haven bid.

But the really notable thing about gold’s most recent move higher, Charlie remarks, is that “it’s come in the face of the US Dollar Index making nearly three-year highs” (see the bottom pane). So much for the negative correlation between the greenback and polished, yellow paperweights.

The dollar is now an economic outperformance/safe-haven story, spiced with expectations of more monetary policy divergence as global central banks are forced to ease more aggressively than the Fed as the virus impact ripples across Asia and Europe.

McElligott reinforces that, noting that the dollar’s climb is in part due to the euro’s “slow-collapse into the market’s heightened ECB rate-cutting expectations”.

In equities land, Charlie offers this visual summary:


Meanwhile, JonesTrading’s Mike O’Rourke delivered a delightfully colorful assessment of the situation. “We are operating in an environment where mania has taken hold”, he said late Tuesday, after markets held up reasonably well despite Apple’s revenue guide-down.

O’Rourke wasn’t done. “Retail has re-engaged en masse in the form of zero commissions, the FOMC is pumping liquidity at the same pace it was during the heyday of QE1, passive managers and index products have no choice but to buy, and active managers can’t afford to sell in this environment”, he went on to say, before driving it all home with this:

In most investing environments a withdrawal of guidance on a holiday would have been a red flag met with massive selling pressure knocking a company’s shares more than 10%.  The liquidity and euphoria has people behaving in the one-mentality of the early 1970’s and the late 1990’s.

So… buy the dip?


6 comments on “‘Mania Has Taken Hold’, And Other Observations As The Tape Goes ‘Macro’

  1. Investors expect widespread guide-downs for 1Q, yet COMP +0.8% today . . . market willing to look through

  2. Seen on FinTwit this am from Jim Cramer: “what the hell is happening? Where are the sellers??”

    • Yeah, I saw that. He’s the worst at trolling, primarily because it’s never clear whether he’s trying to troll or not. He doesn’t know how to throw any shade.

  3. Days like today make the cognitive dissonance associated with BTFD mentality too hard to ignore. Valuation, macro events, negative earnings, corporate debt…none of it matters, and yet, it does…or at least, it will. I work in the tourism industry which I can attest is being decimated right now. While I’d love to my finger in my ears and ignore what’s happening with stocks like TSLA and SPCE, it’s too similar to 1999. Best of luck to bulls.

  4. It just occurred to me that there is a similar relationship between objective versus subjective criteria and the concept of trolling versus manipulation (media or financial/political…) My reasoning is the definitions of these concepts have become so muddled in this age of information overflow that it literally takes a news cycle to sort out rational thoughts or critique on anything ……Bizarre events have become the rule of the day so the market maybe is smarter than all of us , and reacts to absolutely nothing…

  5. I have known and respected Mike for a long time and again totally am on the same page with his thinking.

    But as I get run over betting on rationality and fundamentals to eventually win I keep thinking if we have our hair slicked back acting like Elvis with girlfriends in poodle skirts and maybe the quants/computers have just taken us and pushed us aside to the relic bin.

    CBs have distorted markets, computers/quants have as well. I love this industry, this career but it sometimes feels like I am crooning while the world is rapping and I am all alone.

    The end of the long/short manager………..

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