One month ago, we were stunned to report that none other than billionaire Carl Icahn had taken the net exposure of his hedge fund, Icahn Enterprises, from a modest net 25% short - his recent negative bias on the market was hardly a secret - to a practically apocalyptic, 149% net short which is about as close to betting on a market crash as one could get.
One month after Goldman strategists downgraded equities to neutral on growth and valuation concerns, the firm has turned up the heat on the bearish case with a report by Christian Mueller-Glissmann in which he says that equity drawdown risk “appears elevated” with S&P 500 trading near record high, valuations stretched, lackluster economic growth and yield investors being “forced up the risk curve to equities."
In an overnight session dominated by the latest political developments out of the US where Hillary Clinton officially claimed the democratic nomination, the financial newsflow focused on China's trade data, where exports fell 4.1% from a year earlier, in line with expectations, but imports dropped 0.4% from a year earlier, the smallest decline since they turned negative in November 2014, likely reflecting higher commodities prices but really driven by "imports" from Hong Kong which rose to $2.48b, the highest since at least 1999; and a 243% y/y surge in dollar term, also a historical high.
The S&P has made this move up on weak volume while, as Credit Suisse notes, macro trends diverge significantly. Given the focus on the S&P 500 as we approach all-time highs, the chart they find most interesting is the S&P 500 vs the US Macro Surprises divergence...
The big question is which one will prove to be correct? For now, the S&P 500 continues to “ignore” the data...
Submitted by David Stockman via Contra Corner blog,
Whatever is going on in the daily stock market, you can’t call it “price discovery” or even remotely rational.
In fact, it amounts to grinding in harms’ way, and measures the degree to which the Fed and other central banks have turned the Wall Street casino into a giant litter of sick puppies who are bent on rolling the dice until they self-destruct.