For a day, maybe two, it looked like the stars might be aligning for a bearish contingent that’s spent most of 2023 stuck in a “can’t win for losing” nightmare.

Rekindled bank stress fears courtesy of First Republic, US debt ceiling drama, expectations for at least one earnings miss from mega-cap US tech and the exhaustion of systematic buying power, all looked like good candidates to shake equities out of the narrow closing range that served to suppress realized volatility over the past month, particularly as OpEx opened the door to a wider distribution of spot outcomes.

Alas, it wasn’t to be. Microsoft, Alphabet and then Meta all topped expectations with quarterly results, and just generally speaking, corporate earnings haven’t lived up to the bearish hype. Not even close, really. Even if Amazon and Apple underwhelmed, it wouldn’t be enough to validate what, in some top-down corners anyway, remains a very gloomy outlook.

At the same time, House Republicans pulled off a halfway passable impersonation of legislators, no small feat. And then tax receipts surged, likely pushing Janet Yellen’s default “x-date” several weeks into the (still not-so-distant) future.

As Nomura’s Charlie McElligott put it Thursday, “Hope springs eternal, and just when risk assets needed it.”

“US equities mega-cap tech continues to save the day and offset the First Republic macro- and systematic fund positioning- / options market structure- volatility catalysts, with more ‘better-than-feared’ prints [while] stronger tax collection data push[ed] back ‘worst fears’ x-date drama and the House GOP plan passage show[ed] the party has reined in the Freedom Caucus and struck some basic level of compromise, ‘phase 1’ of getting a larger deal done,” he wrote, describing the large tax haul and Kevin McCarthy’s “I told you I could do it!” moment as “two other local vol-curbing dynamics.”

The result: A relief rally, short-lived or not, and a painful experience for some.

Charlie explained the straightforward visuals shown above: “Nobody has enough US equities beta on because of the defensive quality, ‘slowdown’ posture.”

“Stocks ripp[ed] back on this mood resurgence and a resumption of ‘short vol’ hammering,” he went on, adding that it “doesn’t necessarily feel great if you’re market neutral / running a short book, as [Thursday] looked like a ‘beta factor’ gross-up or, conversely, a ‘low volatility factor’ gross-down, as [your] defensives / dividend stuff meaningfully underperforms.”