Who wants to deal with it?

If you’re not asking yourself that question vis-à-vis the day-to-day chop in a frustratingly tedious equities market (where, thanks in part to the proliferation of 0DTEs, every session “its own ecosystem,” as Nomura’s Charlie McElligott is fond of putting it), you probably should be.

The combination of macro cross currents (i.e., conflicting data) and the incessant seesaw dynamic fostered in part by options hedging flows, makes discerning signal from noise even more challenging than usual. It doesn’t help that the outlook for corporate profits is hopelessly ambiguous, commensurate with the pervasive uncertainty surrounding the economy.

Importantly, the run of hot data (which continued Thursday with a European inflation beat and large upward revisions to US unit labor cost figures for Q4) means economists on Wall Street are probably taking up their forecasts, which then increases the chances of downside surprises going forward. If that occurs, the hawkish repricing across rates will look like an overshoot, and any correction (i.e., back in the dovish direction) could have implications for equities.

“This is a key driver as to why the broad market environment continues ‘chopping, lunging and chasing,’ as crowded narratives and positioning continue getting reset on overshoots in both directions,” McElligott said Thursday.

It’s too much to expect humans to process all of this instantaneously on the way to deciding what’s “real” and what’s not. There are machines for that. Unfortunately, the price action they engender often contributes to the confusion.

Notwithstanding the “chop,” McElligott noted that “the grind lower in spot equities does still put us increasingly near a pocket of ‘accelerant flow’ risk to the downside,” in part from potential CTA selling. In addition, the lower we go, the more risk there is from dealers who could slip into short gamma territory on their longer-dated options positions.

Fortunately, you don’t have to deal with any of the above. The screengrab on the right below is a not-so-subtle reminder of just how viable USD cash really is these days as an asset class.

The table on the left shows where the money is going in terms of ETF flows.

“Who wants to deal with this day-in, day-out reversal / whiplash madness, when you can be parked in cash, a de facto ATM Put, while others trade themselves into knots and get chopped up,” McElligott asked.

He noted that the three largest one-week inflows “across the entire US ETF universe” were in short-term Treasury and Bill products.